Online fashion store builds business through drama of sales shopping

A bright future backons for a firm that grossed over $550m in 2012

Most people have battled the Christmas sales at some stage, shoving their way through throngs of shoppers to grab the best deals. Now the mobs are moving online, thanks to websites like Gilt, which pulled in more than $500 million (€364 million) last year through flash sales.

The business model of the Dublin and Limerick-based company is a clever one. Every day at 5pm it launches new, limited-time sales of sought-after products and desirable brands.

It also recreates that crazed rush of the Christmas sales, by giving online shoppers just 10 minutes to purchase the items in their basket, or risk losing them forever to someone else.

For several years following its 2007 inception, Gilt was the model for how to build a fast-growing company on the back of e-commerce innovation. Founded in the US, it took full advantage of the recession, consumers’ desire for low prices and retailers’ need to sell excess inventory.


But other businesses quickly began copying the innovative model, causing Gilt to lose its lustre. When chief executive Michelle Peluso took the top job last year, most people would have been intimidated to step up to the plate. The company was losing money, growth was slowing down and 10 per cent of the workforce had been laid off.

But Peluso is someone who likes a challenge, and entrepreneurship is in her blood. Both her father and grandfather were entrepreneurs, and running a business has always been something she wanted to do.

“Even as a teenager, I wanted entrepreneurial jobs. I didn’t want to earn minimum wage flipping burgers so I started a swim school in my backyard. I got around $30 to $40 per hour so earned 10 times the hourly rate my friends got.”

When she was 15, Peluso managed to get hersel on to a media trip to Russia, insisting it was important for journalists to see issues from a student’s perspective also.

“I needed to spring on my parents that I was going to go to Moscow with a group of people, miss three weeks of school and I needed $3,000. So, I cooked breakfast for them. My parents weren’t thrilled about it.”

She was allowed to go to Russia though, and found the trip instilled in her a desire to learn more and study business.

“People would do just about anything to buy the jeans that you were wearing. It was a fascinating experience for me – learning about how the global economy works and how it creates bonds between us.”

'Hunger and justice'
The experience led her to start a foundation – New Generation for Peace – which for several years brought students together to talk about global issues.

“We brought young people together from all over the world to discuss issues such as hunger and justice.”

Peluso went on to study business at university before dabbling in politics as a White House special adviser during the Clinton administration. She returned to her entrepreneurial roots in 1999 when her former employer, the Boston Consulting Group, called her with the idea for Site59.

“I felt if I didn’t try entrepreneurship, I’d get too comfortable working at a big company.”

Specialising in last minute travel deals, Site59 did well at first, but suffered in the wake of the September 11th attacks with revenues falling 70 per cent.

“We had been in talks with Travelocity before 9/11 but then revenues plummeted to zero. We had to rebuild the company.”

Peluso and the staff quickly rebuilt the company and just six months later, in March 2002, it was acquired for $43 million by Travelocity.

Travelocity had revolutionised the travel business by launching the first online travel website in March 1996. It quickly grew into the third largest e-commerce site in the world behind only Amazon and e-Bay, employing some 5,000 employees.

Following the acquisition, Peluso took a job as senior vice-president of hotels and packaging at Travelocity, being promoted to chief operating officer several months later and chief executive several months after that

“At the age of 31, I went from running an 80 person organisation to a 5,000 person organisation. I rang my Dad and was, like, ‘help!’.”

In the 12 months following her appointment as chief executive Travelocity went from losing $55 million a year to making $13 million.

In February of this year, Peluso took the helm of Gilt Groupe, having spent three years on its board of directors. Her first mission was to correct the course of the company and scale down underperforming business units.

Diversification projects
"We had expanded into a bunch of different new categories, some of which weren't working, and it was really critical for us to call that. We exited things like travel, full-price men's and food."

She has also been working on making flash sales better by using data on customers’ clothing sizes, preferred brands and browsing history to offer special time-sensitive sales tailored to individual customers. Peluso’s reasoning is that sales will be more attractive if they’re exclusive to a single person.

The company, which already employs more than 150 people in Ireland, intends to expand here, having announced the creation of 45 engineering jobs.

Peluso says the company’s Irish technology team has been “instrumental” in developing the e-commerce platform and site relaunch. The company has its international headquarters, a technology hub and a customer services centre for US customers here, with the next step being to open an innovation centre.

While the online purveyor of clothes has flirted with an initial public offering (IPO) several times in the past, she says the company is in no hurry to float.

“An IPO is the likely outcome. We are not in a rush as we are generating cash. We are not in a situation where we need some infusion of cash.”

While she wouldn’t reveal 2013 revenue, she said the business did more than $550 million in gross revenue in the 2012 calendar year.

As for Peluso’s role at the helm of the shopping website, she says: “I never want to be a lonely arrogant CEO that is fed bullshit by everyone else.”