Report: Hudson's Bay trying to buy Gilt Groupe for a fraction of its old value

Dive Brief:

Canadian retail company Hudson’s Bay Co., which owns, among others, American department stores Saks Fifth Avenue and Lord & Taylor, is closing in on an agreement to buy flash-sales retailer Gilt Groupe for $250 million, sources have told the Wall Street Journal.
The deal would substantially gut Gilt Groupe’s valuation, which in 2011 was as large as $1.1 billion.
There is no final deal, and negotiations could yet fall through or another buyer could outbid Hudson’s Bay, according to the Wall Street Journal.

Dive Insight:

This development is a sign both of the decline of the flash sales model and the need for department stores to find new ways to appeal to shoppers. In fact, we may see more retailers like department stores next year move to acquire pure-play retail enterprises like flash-sale sites, Keith Anderson, VP of strategy & insights at Profitero, told Retail Dive this week.

The basic concept behind flash sales isn’t exactly new — limited quantities of goods at a limited sales price for a limited time. Kmart’s “Blue Light Special” was a version of this ploy, and plenty of retailers have used “limited availability” to entice shoppers to act soon.

But, after some initial excitement, the concept hasn’t lasted online. This may be due to the improving economy, as more shoppers are able to relax a little on price. On the other hand, there are plenty of other places, like retail phenoms T.J. Maxx and Marshall’s, to find designer goods at lower prices, both online and in stores.

The flash sales sites themselves also may be running out of sources for the merchandise that were exciting shoppers at first. In 2006, when flash sale site Ideeli was founded, and in 2007, when Gilt Groupe and Rue La La were founded, luxury retailers and designers had copious amounts of inventory they were anxious to unload. By 2011, though, that had dwindled, leaving less for shoppers to choose from. And, desperation abated, less attractive pricing.

The flash sales wunderkinds have all dealt with the change in various ways. Zulily, hampered by its logistics approach and challenges to growth, was recently gobbled up by QVC. Gilt Groupe recently announced job cuts and shifts to its business model. Ideeli, after being sold to Groupon, inexplicably lost an “i,” and even Vente-Privée, seen as the innovator of the space, has wound down its U.S. operations.

The model could be useful to a department store, though, especially perhaps its new by-appointment studio in New York. In any case, it appears that predicted consolidation continues to happen in the space.