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Is Gilt Groupe Ready for an IPO?

Posted on Thursday, Sep 18th 2014

An eMarketer report released earlier this year estimates US retail sales to have recorded a 4% growth this year to $4.53 trillion. The researcher revealed that brick and mortar sales still amount to a major proportion of the retail sales in the country and contributed $4.23 trillion of total sales. E-commerce transactions grew 17% in 2013 to bring in $304 billion and are projected to grow to $491.5 billion by the year 2018 to command 9% of total retail sales in the country.

Gilt Groupe’s Offerings
Besides traditional e-commerce giants like Amazon, the country is also flooded with flash sales sites, some of which have done well so far. One such flash site for sales of luxury, designer label clothing, and accessories is New York-based Gilt Groupe, which was founded in 2007. Gilt offers its 7 million members access to some of the top trending merchandise and experiences at prices discounted as high as 60%. Their product range includes coveted brands and products for fashion, home décor, and unique activities in a few cities and destinations.

Last year, Gilt also deployed smart algorithms to offer to their subscribers a personal sale feature. Members are now able to access a sale daily that is best suited to their tastes and brands based on their previous shopping and browsing behavior.

Earlier this year, they also announced a tie up with TheClymb.com, a flash site for outdoor apparel and gear. Through the agreement, Gilt will take charge of all fulfillment services for TheClymb. This is the first such contract that Gilt has entered into, but it plans to let out their services to other e-tailers as well.

Gilt Groupe’s Financials
Gilt operates on passing some of the wholesale discount they get from their sellers to the buyers. Their buying teams approach wholesalers whose products they like and agree to take unsold inventory from them at a steep discount. Gilt then offers these products as flash sales to their members and thus earns their revenues.

Gilt’s financial details are not known. According to market reports, they were making 50% gross margins on all sales. Gross revenues have grown from $450 million in 2011 to $550 million in 2012. They were expected to be cash positive at the end of 2013. They have been venture funded so far with $236 million from investors including Softbank, GSV Capital, DFJ Growth, Pinnacle Ventures, TriplePoint Capital, Eastward Capital Partners, Matrix Partners, and General Atlantic. Their last round of funding was held in 2011 when they raised $138 million at a valuation of $1 billion in a round led by Softbank Group along with existing investors. Analysts have been speculating an IPO from Gilt for some time now. They expect them to announce during the third quarter this year as they continue to improve their numbers to impress the Wall Street. Gilt has maintained silence about it. Recent rumors do suggest that they have hired Goldman Sachs to help them with the IPO.

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