NEW YORK (AP) — Hudson Bay has purchased the luxury deal site Gilt Group Holdings Inc. for $250 million as traditional retailers follow shoppers, and their money, online.
The Toronto retailer, which owns stores under its own brand as well as Lord & Taylor, Saks Fifth Avenue, and Saks Off 5th, will at the same time integrate the online company into some of its physical store locations. Gilt concept shops will open at Saks Off 5th, Saks Fifth Avenue's off-price division. And Gilt shoppers will be able to return merchandise bought online at Gilt at Saks Off 5th.
Gilt has cultivated a loyal base of affluent millennials, a demographic shared with Saks Off 5th. It has more than 9 million members and about 50 percent of its orders come from mobile devices.
Hudson Bay CEO Jerry Storch points to the success at Gilt of personalizing offers for its customers.
"We are a huge believer of an all-channel retail model," said Storch." Gilt is a very cool brand. This opens up a whole new world for Hudson Bay."
The deal is expected to close Feb. 1. The addition of Gilt Group Holdings Inc. is expected to contribute $500 million to revenue in fiscal 2016.
A deal between Hudson Bay Co. and Gilt has been rumored since December and comes as the popularity of flash sites like Gilt fade. Yet Storch told The Associated Press that he believes these types of businesses can thrive in stores.
Storch said that he is using as a model Nordstrom's acquisition in 2011 of the flash site HauteLook. Nordstrom's discount division Nordstrom Rack learned from Haute Look's customers following that deal.
Nordstrom said last November that since its purchase of HauteLook, online sales now represent more than 10 percent of its overall off-price business. In contrast, it took the company more than 10 years for Nordstrom.com to reach that level of online penetration.
Craig Johnson, president of Customer Growth Partners, a retail consultancy, said the deal between Hudson Bay and Gilt is an "excellent move." He said it gives the retailer another way to drive traffic into the stores as Gilt shoppers can return items at Saks Off 5th locations, and then have a chance to buy something else.
"This gives you a second bite of the apple," Johnson said.
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