Online retailer Gilt Groupe is being bought by Hudson's Bay, the company behind Saks Fifth Avenue, for $250 million in a move that says quite a bit about the changing nature of commerce. Here are some key details from Re/Code, which broke the story:
Financially, the deal marks a disappointing outcome for Gilt, which has raised some $280 million in venture capital and at one time was valued by investors at more than $1 billion.
Strategically, however, the acquisition, which is expected to close February 1, could breathe new life into the brand. In a press release, Hudson’s Bay said Gilt customers will be able to make returns to Saks Off Fifth discount stores, which will eventually feature Gilt “concept” stores.
Entering the Commerce Matrix
The Gilt acquisition speaks to a number of ongoing trends, says Constellation Research VP and principal analyst Guy-Frederic Courtin.
"The question becomes does this indicate that pure e-commerce players, especially in retail, have a ceiling?" he says. "And do they have to look for traditional retailers to come in and gobble them up?" There's no clear-cut answer to those questions for now, Courtin notes.
Still, apart from being acquired, there's been a number of instances where once purely online retailers have opened up brick-and-mortar stores, with men's fashion purveyor Bonobos and diamond seller Blue Nile being but two examples. "It's another indication the pureplay guys have a ceiling and have to figure out whether they go into brick and mortar," Courtin says.
In turn, online sellers are making efforts to recreate the brick-and-mortar experience online. For example, a furniture seller might provide a software tool that customers can use to virtually place items in a room.
Courtin questions how far this approach can go. "To me it's the same thing as 20 years ago when we started getting telepresence capabilities," he says. "Everyone said, that's the end of business travel. It certainly has its role and place in business, but I espouse the notion you still do business face-to-face. The amount of business air travelers I see has not diminished."
On balance, these trends speak to a basic truth, in Courtin's view. "We need to stop thinking about brick and mortar, mobile commerce, e-commerce. We just need to think about commerce," he says. "Where it's being done becomes less significant than just being able to do it. We need to stop harping on the technology too much and focus more on the process and business model."
"I'll go to a store, use my mobile phone to check the price, maybe buy something at the store and then have it delivered to my house," he adds. "Or I might buy it in he store and have the product shipped there. We're getting to a point where it is truly a notion of, as a consumer, I don't care."
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