Flash Sales Flourish with Gilt’s Latest Buy, Daily Deals Decline in Kind

Among the digital industries turning investors’ heads these days is flash sales and daily deals.  Because of the strong competition within the advertising and retail markets, it’s not surprising that a third of these sites are now dead in the water.  Those that survived have been expanding everywhere from groceries, gadgets, wedding packages — and even college tuition fees.

Flash Sales Sites Flourish

The latest market development comes from Gilt City, making another acquisition.  The leader in flash sales has taken in Dine Private, a fine-dining booking engine.  Dine Private is partner to 90 private dining spots in New York City, and was founded by Joe Bastianich and Jeff Zalaznick.  It’s the latest in a bold move by Gilt to dominate flash sales in the lifestyle category–the company has made several acquisitions in recent months, staying a step ahead of competition.

And that competition is rising, as many other retailers and tech companies look to cash in on the flash sales model.  Amazon’s MYHABIT recently expanded its offerings, adding curated and vintage sale events to give customers access to collections at various price points from a wider range of luxury brands.  “The Curator” series will feature hand-picked items from the fashion industries’ top designers, and “Archive” events will feature vintage luxury and designer clothing, jewelry and accessories.

We also have Rue La La launching Little Rue to cater the fashion needs of the entire family.  It features apparel, accessories and experiences that are kids-friendly. “Little Rue is an exciting addition to the Rue La La family,” said Ben Fischman, CEO, Rue La La.

“From sourcing the best offerings from the most sought after brands in the world, to identifying charitable giving for the business — Little Rue has galvanized all of us and become a labor of love here at Rue.”

Unlike many other flash sales sites, Rue La La has continued to close its doors to social sign-ins such as Facebook connect. According to the site’s chairman and CEO Ben Fischman, “that’s the beauty of the invitation to join Rue La La.”

Daily Deals see Daily Growing Pains

But even as the industry at large appears to be a booming success, daily deals faces its own set of growing pains.  The reason merchants initially bought into the idea of daily deals was because they were expecting to build loyalty among customers.  However, these customers just show up one time to avail of the deal and may never show up again.  Daily deals giants Groupon was reported to have lost $100 million this past summer alone.

Six months ago, the hype about the Groupon’s IPO was so high its expected valuation rocketed to $25 billion.  However, many now wonder if it’s just hot air.  A Bloomberg report says the site might have to value its IPO between $3 billion and $5 billion. This is far less than the acquisition offer made by Google last year.  Rethinking a few things yet, Groupon?

And it seems like Living Social is learning well from the experiences of Google as it contemplates on getting funding instead of an IPO. The funding round will include debt and equity.

“Interest is diminishing by the week,” said Schuster, who manages $2.5 billion in assets for the Chicago-based fund. “All the news that’s coming out underlines some form of turmoil in the company. As an IPO investor, you don’t want that.”