Can Gilt Group’s CEO Save Christmas?

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Kevin P. Ryan, who led DoubleClick (GOOG) to a billion dollar exit and is now CEO of e-Commerce site Gilt Group, attributes his success to one factor: recruiting. “Innovation comes from people, so the team is everything. I spend more time on human resources,  20 percent of my week, than anything else.”

Ryan has 7 in-house recruiters on staff and holds daily meetings with the Head of HR. In fact, there are currently 13 CEO’s of major internet companies whom Ryan hired for DoubleClick. “I am incredibly bullish on great people. Getting them and keeping them happy is the most important thing I can do.”

The focus on people has helped e-Commerce site Gilt Group, where he is the original investor and CEO. In two years, the company has grown to 500 staff and is looking to add an additional 100. “People thought we were crazy to invest in high-end retail during a recession. But I am not interested in what has happened in the last 5 months. The more important question is what will  the industry look like in five years.”

One way to end the conversation with Kevin is mentioning ‘exit strategy’. “I get nervous when I hear that term. It can cloud thinking and distort execution. The better question is do I have the right team to create a big business that is profitable.” By that measure, Gilt is a success. The company has more than 2 million members and expanded beyond women’s fashion to Men’s Fashion, Travel and Local. Revenue this year will top $500 million, some of which was used this month to acquire competitor Bergine. Last fall, private-sale site RueLaLa was sold for $350 million and many are expecting Gilt’s venture investors General Atlantic and Matrix to push for an IPO in the next 18 months.

Each day at NOON (EST), fashionistas can be found hitting the refresh button for the daily Gilt sale. Inspired by France’s Vente Privee (which has 11.5 million members and estimated 2010 turnover of €800), this is an invitation-only, private sale with discounts of up to 85% for luxury apparel, accessories, travel and home furnishings. “Our approach creates urgency and scarcity but is more cost-efficient”, says Ryan. According to Sucharita Mulpuru, an analyst at Forrester Research, “Gilt’s only big competitor is the outlet malls.”

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Gilt is one of 6 investments that Ryan and his Alley Corp partner (and former DoubleClick co-Founder and CTO) Dwight Merriman have made. Two were not successful- Music Nation, which closed, and Panther Networks, which was sold to Korean competitor CDNetworks for a fraction of money raised.

However, there have been significant successes as well. Ryan was the first investor in online job listings sites HotJobs (acquired by Yahoo for $436 million) and The Ladders, which will earn $80 million in revenue this year. Alley Corp created and financed Business Insider, which has more than 3 million unique visitors and includes media and technology blogs such as Clusterstock, Silicon Alley Insider, The Money Game, the War Room, the Wire, and Law Review. In addition, there is 10gen which provides enterprise-grade technical support and services for MongoDB, the open source database platform.

But Ryan’s focus now is the e-Commerce sector, including investments in shoppingwiki.com and Gilt Group. According to Comscore, in 2009 Americans spent $29 billion in e-Commerce during the all important holiday season. This year, that number will likely grow by 11 percent. In fact, consumers have already parted with $9 billion online during the first three weeks of November, 13 percent more than last year.

Gilt has drastically reduced the cost of acquisition by attracting new members through word of mouth. “I think one of the most under-utilized mechanisms today is email. At Gilt, we use email, instead of advertising, to reach people cost-efficiently.”

Gilt has also created a bifurcated revenue stream- the sale of merchandise and brand advertising. “We offer a hybrid experience to expose and promote brands to hundreds of thousands of people.” For example, a major car company will pre-sell a new luxury model on Gilt for a significant discount. Similarly, Brooks Brothers’ fall collection launched on Gilt before the line was actually launched. Brooks Brothers sold 500 suits but the larger benefit was reaching hundreds of thousands of hard to find male customers. “Brooks Brothers saw a surge of traffic to their site and stores. In a way, this was instead of a pay-per-click campaign with Google, paid for in the form of a discount for Gilt customers.”

Brands and designers are now approaching Gilt for online / offline partnerships. Earlier this month, Gilt hosted a summit in New York for major brands. “I get asked all the time by our brand partners if they are ‘too late’. The answer is ‘no’. The early bird may get the worm but the second mouse gets the cheese. Things didn’t work out as well for the first mouse.”

Levi Shapiro is a Partner at TMT Strategic Advisors, a global research and strategy firm focusing on the technology, media and telecom sectors.

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