Flash sale site Gilt is offering what perhaps is the largest sale in its history – one of its own sites.
The Wall Street Journal reports that the company is jettisoning its travel site Jetsetter. And in hopes of a quick sale, the company is offering a 50 percent discount to boot!
WSJ says that Gilt’s owners had been seeking around $100 million for the site, but would settle for half that amount. The problem is, no one seems to be interested. One person who looked at the site called the asking price “too high” and the business model “too inefficient.”
The reason for the sale; money, of course, or the lack of it to be precise.
Growing pressure from investors to increase revenue forced the company to reach outside its wheelhouse into new markets, none of which have become profitable. If that sounds a little like what’s happened with Facebook since its IPO, it’s the same dynamic. Borrowed money brings with it added pressure to show a profit. In Gilt’s case, it’s a problem the company has wrestled with since its inception in 2007 to no avail.
Jetsetter is not the only one of its sites Gilt has unloaded. According to the Journal, the company has plans to close Park & Bond, its full-price luxury men’s apparel business. It has also cut back on editorial content at Gilt Taste, a full-price food business, said the WSJ.
It’s a catch 22: without investment, companies can’t grow; with investment, they have to, which often leads to bad decision making.
All in all, these are troublesome days for the startup. Jetsetter’s former CEO Drew Peterson left in May and no one has come along to replace him. That’s been accompanied by increased staff turnover and lowered morale.
But don’t count the company out just yet. Expectations are that Gilt will file for an IPO in 2013 – which could explain its housecleaning efforts – and the company is hoping to break even by the end of this year.