Gilt’s New Business: Running Logistics for Other E-Commerce Sites
When Gilt ran into trouble over the past couple of years, it was often when it veered off its core focus of selling discounted apparel for men and women. There was the failed attempt to sell food on Gilt, as well as an unsuccessful move into hawking full-priced men’s clothing.
But as CEO Michelle Peluso told me in June, such failures wouldn’t make the company shy away from new ways to make money as long as they align with what Gilt already does well.
“Maybe they send products to our warehouse, and we manage distribution and fulfillment of those products,” she said at the time of one potential new way to work with brands or retailers that currently sell through Gilt.
Last September, the company revealed this week, Gilt started handling practically all distribution and fulfillment for one of its customers: The Clymb, a flash sale e-commerce site focused on gear and apparel for sports like skiing and surfing. And it is currently pitching the same service to a handful of other select retailers and brands that sell merchandise to Gilt shoppers, Gilt’s supply chain chief Chris Halkyard told Re/code in an interview on Monday.
“We consider distribution a core competency at Gilt and it also is one way of … being more indispensable to brands,” he said.
The move comes as Gilt searches for new avenues of profitable growth as it positions itself for an IPO for late this year or early next. But it is not a completely new idea. Amazon.com has operated a similar and successful program — dubbed Fulfillment by Amazon — since 2006, allowing any business that sells on its marketplace to use Amazon to package up and ship products to customers.
The Clymb COO Cam Ferroni said that nearly 99 percent of all his site’s product shipments are now running through Gilt’s Kentucky distribution center. Not surprisingly, Ferroni said the fact that Gilt has expertise in flash sales was a big reason for the deal.
“They’ve been at our stage and understand the difference between flash sales and traditional distribution or traditional warehousing,” he said. “There’s almost instant turnaround; inventory, in some cases, is coming in on a pallet and shipping out to a customer on the same day.”
The alliance also allows the two sides to get cheaper deals on things like packaging material, since such vendors typically charge less as order volume increases. The move from the Brooklyn-based third-party logistics company it previously worked with has cut about seven days off The Clymb’s delivery time, Ferroni added.
That said, The Clymb took a conservative approach to delivery promises it made to its customers this holiday season. Perhaps too conservative, Ferroni said. For example, the company realizes now that it could have moved order cutoff dates for Christmas deliveries back two days for certain New York customers, thanks to the new distribution arrangement.
“We weren’t playing as close to the edge and maximizing as much as we could have,” he said.
The Clymb is paying Gilt a per-order fee as part of the deal, which resulted in Gilt needing to add some staff at its facility that now employs around 250 full-time and part-time workers. At the same time, Gilt is now bringing in more revenue against essentially the same fixed costs it has always had.
But as Gilt pitches the service to some of its other customers, Halkyard said it is being careful to avoid once again biting off business that it can’t handle.
“We’re going to be very, very specific and strategically try to decide what type of business make sense as opposed to working with just anyone.”