Gilt Groupe has the ultimate flash sale: Sells itself for $250 million

Gilt Groupe Sold for 250 million dollars

The Gilt Groupe has sold for $250 million.

The popular sales portal is known for offering big discounts on luxury fashion but it’s biggest price drop was selling itself for far less than its $1 billion market valuation in 2011.

Hudson’s Bay, the parent company of Saks Fifth Avenue, announced on Thursday that it had acquired the company in an all-cash deal that will be completed by February 1.

Gilt Groupe was founded in 2007 to offer customers luxury fashion items for up to 70% off during flash sales that lasted between 36 to 48 hours.

By 2009 Gilt Groupe was attracting more than 1 million members and by 2011 it skyrocketed to 5 million customers. In 2015, the company claims 9 million customers among its ranks.

Hudson’s Bay says it will use Gilt to grow its discount business and will integrate the platform with its Saks OFF 5TH locations.

“We plan to continue to foster Gilt’s culture of innovation, which has helped create a strong brand with a loyal and devoted millennial following,” said Jerry Storch, CEO of Hudson’s Bay, in a statement.

Gilt has raised over $286 million in funding, but like Groupon and other deals sites, it has had a hard time attracting enough customers to massively scale its model.

While the company’s user base continued to grow, its sales didn’t, signalling that perhaps users were signing up, making a purchase, and not returning for a second product buy.

The company was on track to bring in $600 million in 2015, down from $660 million in 2014. Gilt had also been depreciating in value. In February 2015, analysts said it was worth just $600 million.

One of the biggest problems faced by company’s like Gilt is the high cost of user acquisition, mixed with difficulties associated with acquiring the inventory needed to allow for steep discounts in price.

Hudson’s Bay could help with the inventory issues given its strong relationship with luxury designers who sell into the company’s Saks Fifth Avenue locations.