Gilt Groupe is an invitation-only-site that holds sales of discounted designer clothes.  It’s an identical twin of Vent Privee, a French business that invented this whole business model.  I’m both an occasional customer–and a steady fan–of Gilt Groupe.

They’re getting a lot of press because they are red hot ($150MM in sales expected this year, having launched late 2007) and Gilt just took in $40MM in new investment capital.

So, people see this exciting innovation in the e-commerce space, and wonder if “Daily Grommet is like Gilt Groupe?”  Well, yes.  And, no.

Here’s the “Yes” part:

• Event based. Both businesses create a laser focus on a brand or product.  In their case, it’s a 36-hour fire sale, and our focus is more like a 24 hour opportunity to chat with the creator of a product, learn its story, and perhaps buy it, share it, or remember it for later.
• Passionate communities. Both our our communities check in avidly every day and don’t want to miss anything.
• Good cash flow models. When you don’t hold perpetual inventory, you can get paid by your own customers before you fulfill your supplier payment obligations.
• Natural word-of-mouth businesses. Both businesses benefit from this.
• Ambitious. Gilt is big.  We expect to get there too.
• We save people time. It takes time to seek out fashion bargains that Gilt offers.  And it takes even more time to seek out inspired products (Grommets) and their stories.

Peaches from the Lexington, MA Tuesday Farmer's Market

Here’s the “No–this thing is not like the other,” part:

• Serendipity. You never know what you will see from Daily Grommet.  People like the surprise.  Gilt pretty much pre-sells all their inventory by advertising the sales ahead of time.
• Private vs. public. Sometimes people share Daily Grommet with a friend and say, “And it’s free!”  I think they expect to pay for access to our site, or something.  This is counter to our ethos…we are openly sharing our stories because we want to share the love for our Grommet suppliers.  Gilt Groupe has to keep things behind closed doors…when you are deeply discounting merchandise it damages the brand’s full price efforts. It needs to be private.  And….an invitation-only site is a genius way to get people to share it with their friends.
• Product margins are strong. We honor the manufacturer’s suggested retail prices.  Grommets are not distressed or overstock merchandise–they are the opposite.  They are young!  They are exciting!  They are not has-beens.
• Storytelling and brand. People are into Grommet for the stories, the ideas, the learning as much as the buying opportunities.  Stories drive everything we do, and they are the cornerstone of our brand and the bulk of our work.
• Ongoing sales–from our archives.   Gilt puts a lot of effort into curating their product choices.  So do we.  But when a sale ends at Gilt it is over.  It’s the opposite at Daily Grommet.  By telling its story, we create deep awareness of a product, and people return to us to buy later, or to share the story.   (I wrote a separate post about the wonderful things we’ve seen happen for Grommet suppliers, as a result of our community finding and sharing them.)
• Supply is shrinking for Gilt, and growing for Grommet.  Gilt competes with a growing group of highly competitive off-price retailers for this distressed (out of season, overstock) merchandise.  Their competition is heating up every day–venture capitalists are funding  many, many me-too’s in this space.  Supply is going to be tougher to get when the economy recovers.  We operate in a very different world.  Our only supply constraints are the production capabilities of our manufacturers.  This is not a problem, except with our truly hand-crafted Grommets.  But those producers just need a little more lead time from us, and they are DELIGHTED to make a big order for Daily Grommet.  Most of our Grommets are hoping and praying for big orders and stand ready to fill them.
• Cash. Gilt Groupe has $45MM in venture capital funding!  We have a stable of lovely angel investors supporting and rooting for us.   I think the bootstrap route is the right one for us….it keeps us nimble, and more in tune with our suppliers.   One venture capitalist told me, “Don’t take money from us.  We will force you to too rapidly buy your customers and hire your employees too hastily, and those are rarely the right customers and employees.” But sometimes being cash-starved bites the big one.  Like when I have to sleep on couches with cats on my head (true story), to save the price of a New York hotel room.  Or when your marketing budget is a big empty goose egg.
• Spelling and branding decisions. I can’t stand it when people put an extra “e” on the end of a word.  Like it is somehow classy.
• Building a business, building a movement.  Grommet is, of course, a business.  But we are part of a broader movement that transcends business-as-usual.  People want to support their values, by supporting the little guy with a name and a face behind his product,  the socially responsible enterprise, true innovation, practical problem solvers, wit and humor, craft, technological break-throughs, and eco-friendly products.   It’s like regularly going to a farmer’s market vs. seeking out the quick, creamy pleasure of a soft serve ice cream cone.  People do both, at different times, but feel really different about the two experiences.
• Place. Gilt is headquartered in an office building in Manhattan.  A cool funky one, actually.  Grommet is in a classic New England small town, in a converted Victorian house.  With, now that I think about it, a farmer’s market across the road, on Tuesdays.  (Making that the best day to visit us, for sure!)

So, we’ve landed on some of the same notions at Gilt, but are taking a pretty different path when it comes to our customer experience.    A lot of businesses know how to play in the price arena, and you are only as strong as your discounts and ability to secure supply.   Grommets, and their stories, connect on a deep level that cannot be easily copied by ten other businesses.   I’d rather build the kind of sustainable connection that will transcend supply, price, and the economy.