With the luxury goods market recovering from the recession as rich people get over not acting rich, and everyone on the selling side figuring out how to deal with it overall, promotions have slumped. This is bad for bargain shoppers and bargain retailers. All those flash-sale sites like Gilt Groupe and Rue La La that sprung up when many brands had tons of excess inventory to do away with are now in a bit of a spot.
Reuters explains how it used to be:
Soon after these companies started, the financial crisis ravaged markets and deflated the fortunes of many newly wealthy people. Luxury goods inventory rose to about 10 times its normal level, said [ Steven Dennis, founder of SageBerry Consulting and a former executive at retailer Neiman Marcus], giving companies "adequate supply, good pricing and brands willing to talk to them."
But now, luxury goods are scarce again, and Rue La La, Gilt Groupe, Ideeli, and Haute Look have to find new ways to sell things to people. This explains why you're less likely to find brands you recognize on the sites, why the merchandise isn't discounted as steeply, and why you'll have to pick out your clothes from an assortment that might include the Sensa Weight Loss System (Gilt) or deals on wine tasting tours in Boston (Rue La La).
Gilt denies the inventory is less amazing than it was in past years — but it's clear to shoppers that it's not what it once was.
"I keep expanding the things I can sell to the same people," said Gilt Groupe CEO Kevin Ryan. "Customers like shopping on Gilt, so I should offer more."
Gilt is not having problems sourcing inventory, Ryan added. But Dennis said Gilt offers fewer top luxury brands now. "In Gilt emails I've seen recently, there were nine brands featured, but I'd only heard of two of them," he said.
Now analysts are wondering if these sites will ever be able to turn a profit. Bringing sample sales to the masses still seems like a great idea, but maybe it's just not sustainable. At least you can buy a ticket for some wine drinking to numb the pain.