Rue Gilt Groupe, With $280 Million Investment From Simon, Is Taking Outlet Shopping Online
Author: Lauren Debter
Online discount retailer Rue Gilt Groupe has attracted an investment from the nation’s largest shopping mall operator, Simon Property Group, to launch a new website for outlet shopping.
On Wednesday, Simon said it had invested $280 million for a 50% stake in Rue Gilt Groupe, which is backed by billionaire Michael Rubin and owns flash-sale sites Rue La La and Gilt. The companies have collaborated on a new site, called ShopPremiumOutlets.com, where shoppers can find discounted products from 2,000 brands. The site, which has been in beta testing since March, currently has 300,000 products available, with more to come, the companies said.
Rue Gilt Groupe will operate the site and earn a commission on every sale that is made on the platform. Simon has pledged to use a portion of its $100 million-plus annual marketing budget to promote the new site.
The unconventional partnership brings together a brick-and-mortar retail company and an online retailer in a play to create a new marketplace for off-price merchandise. It’s a slice of the retail industry that has remained stubbornly offline. For instance, Marshalls only recently introduced a website. TJMaxx does only a sliver of its total sales through its website.
“When you put the physical and the online world together, sales for both go up,” David Simon, CEO of Simon Property Group, said in a phone interview. “This gives us an opportunity to create an online platform that shoppers can go in between visits to the outlets.”
As foot traffic at malls has declined, Simon Property Group, a retail real estate giant, has been looking for ways to diversify its business and take part in the e-commerce boom. The CEO says he does not expect the website to cannibalize sales at the nearly 100 outlets that he operates around the world.
For Rue Gilt Groupe, this is a way to diversify its business away from the flash-sales model and become a more dominant player in the online discount space. “We look at this as the biggest opportunity we have at Rue La La and Gilt,” Rubin, the executive chairman of Rue Gilt Groupe, said in a phone interview.
Last year, Rue La La purchased a struggling Gilt for under $100 million, which was a far cry from the billion-dollar valuation it fetched in 2011. Rubin says that business has turned around, noting that he has added 2 million customers since the acquisition and that Gilt’s sales are growing 30% year-over-year.
Forbes estimates that Rubin is worth $2.9 billion, thanks to his majority ownership in Kynetic, a holding company for e-commerce companies Fanatics, Rue Gilt Groupe and ShopRunner.