Why Hudson's Bay bought Gilt Groupe

Dive Brief:

Hudson’s Bay purchase of flash-sales company Gilt Groupe solves problems for Saks and for Gilt, especially as Saks looks to compete with Nordstrom, according to Digiday retail reporter Hilary Milnes.
For Saks, Gilt is a “techquisition,” something Profitero’s Keith Anderson told Retail Dive would likely be happening a lot this year. Gilt offers Saks technology and a new online sales channel without having to build one from scratch.
For Gilt, excess inventory from Saks Fifth Avenue, Saks Off 5th, and possibly other Hudson’s Bay retailers makes up for the dearth of inventory that has hobbled flash-sales sites after their initial rise to prominence during the recession.

Dive Insight:

With Nordstrom widely seen as the department store with the best prospects, other department stores would be wise to consider what they’re doing right, and that appears to be what Saks is doing with its purchase of Gilt.

Nordstrom, for example, took on a flash-sales site, HauteLook, in 2011, and has incorporated it well into its robust online operations. The company unveiled a seamless and mobile-enabled online shopping experience in 2014, tying together its Nordstrom Rack and HauteLook sites.

Shoppers can toggle between HauteLook and the Nordstrom Rack site with one login and browse and buy items for as much as 70% off with a single checkout. Purchases earn Nordstrom Rewards points, and returns from either site are possible at any Nordstrom Rack stores.

Returns serve as a “Trojan horse," David Randolph, senior VP of retail and e-commerce at 360i, told Digiday. “If you return something, you’re more likely to walk around, shop and buy something else.”

While the Gilt purchase could boost Hudson’s Bay’s online sales, it’s also an important wedge to get shoppers heading to Saks and Saks Off 5th in general, including into stores. The company plans to have Gilt “concept shops” within some Off 5th stores.

“We’ve seen with companies like Birchbox that for pure play online retailers, an in-store presence drives growth further,” Steven Dennis of SageBerry Consulting told Digiday. “Having Gilt shops in Saks is a good move to bring to the table.”