Gilt is closing in on Groupon’s turf. In April, Gilt quietly launched a beta version of “Gilt City,” a local deals service that offered a set of weekly deals for New York. Although City remains in beta mode and is only available to approximately one-third of Gilt’s NY membership, the well-funded company is preparing for an official launch in 15 to 20 U.S. markets.
Nothing is finalized yet, Gilt’s CEO Susan Lyne says in our video interview, but “City” is expected to be a significant pillar in the company’s growing portfolio, which now includes flash sales for women, children and men’s fashion, travel and home. While Groupon clones are rushing into the game, Lyne is approaching the local deal business carefully, she’s using the beta version of City to gauge customer demand and find an appropriate model.
City currently displays 5 vendors a week, with each offering one or several deal packages— for example a Yoga studio might offer a discounted 5-class package and a discounted monthly pass. That differs from Groupon, which only showcases one main deal per day, per location (there are small side offers but they don’t get equal billing). While Groupon’s CEO Andew Mason has adamantly defended their one-deal-a-day model, Lyne says she is willing to scale up if there is sufficient demand. Lyne acknowledges the similarities between Groupon and City, and the fact that Groupon may occasionally offer comparable deals, but she argues that Gilt’s editorial voice will remain distinct by consistently offering higher end services/goods.
So far the NY experiment is going well, performance has exceeded expectations and Gilt will open the site to the rest of its NY members within the next few weeks. “Assuming that we continue to see the kind of engagement and excitement from our NY members, we’ll roll it out pretty quickly across the country,” Lyne says. As I mentioned, the company is looking at roughly 15 to 20 markets for City’s national roll out. Every market in this target group has at least 30,000 members, with some cities (like New York) obviously carrying far more. Although the larger expansion is at least months away, Lyne is already thinking about City’s next step. After we wrapped up the video portion of our interview, she mentioned her interest in a hyper local site, a “City” that focuses on key neighborhoods within a metropolitan area (Lyne mentioned Park Slope as an example). Groupon is also trying to get closer to its users, in April, Groupon’s Mason announced plans to launch sites for major suburbs and possibly split larger cities into subareas.
Gilt’s City has a long way to go before it catches up to the king of the local deal domain, or even its rivals, like LivingSocial. Groupon recently raised $135 million, putting its valuation well above the billion mark. However, even in its infancy, City is already a credible threat thanks to the Gilt engine and its huge user base. Gilt has a stunning war chest, with revenues on track to hit $450 million this year and don’t forget that $83 million in funding (just this month the company raised $35 million). Lyne did not disclose how much City has made so far, but she did provide one key example. Before City, Gilt experimented with the local deal by offering a discounted spa package (that was available in roughly 5-6 cities)— within 36 hours Gilt pulled in nearly half a million in revenues. Not a bad start.