To kick-start their online turnover, the parent company of German department store Kaufhof, Hudson's Bay Company (HBC), acquired a secret weapon in February: online discount shopping club Gilt.
The Gilt Groupe sells only to registered members, offering exclusive deals on luxury fashion and travel. The online platform has a turnover of half a billion dollars annually. Next year, the Toronto-based HBC expects a profit of $40 billion from the venture.
Now they also want to bring the business model to a German-speaking clientele.
“We're testing the possibilities for Gilt in Germany,” Jerry Storch, CEO of the Hudson's Bay Company, told Handelsblatt. While a decision is being reached, Gilt is already delivering to customers in Germany and throughout Europe.
HBC, and ultimately Galeria Kaufhof's online presence, should be able to profit from the expertise and ideas behind Gilt.
Shopping clubs certainly can't be compared to the big online retailers but the growth figures show they have enormous potential. Florian Huber, partner, EY consultancy
“We want to use this technology to accelerate the growth of e-commerce in our existing department store brands,” Mr. Storch said, adding that by personalizing the shopping experience, Gilt aims to draw customers in and keep them.
“They're very good at tailoring to the individual interests and preferences of each customer,” he said.
In addition, it's hoped that creating a close bond between Gilt and the department store outlets will bring more customers into the shops. HBC has already shown how well that can work in New York, with their outlet chain Saks Off 5th Avenue. In their Manhattan premises, they introduced a Gilt store, where just like in their online store, a giant clock counted down the time to noon when the members-only discount sale began. When the first Saks Off 5th outlets open in Germany soon, the Gilt premier could take place simultaneously.
Internet shopping clubs are still a niche market in Germany. According to a study last year by the business consultancy EY, this type of retail platform only occupied a 1.6 percent market share in Germany. But they are growing fast. Since 2011, the market has grown an average of 26 percent annually. In 2015, shopping clubs like Amazon BuyVIP, Zalando Lounge, brands4friends and Limango had a combined turnover of €780 million ($890 million).
“Shopping clubs certainly can't be compared to the big online retailers,” said Florian Huber, a partner at EY consultancy. “But the growth figures show they have enormous potential.”
The clubs can count on a strong membership base who, through word of mouth, bring in new customers with big purchasing power.
The members of the internet shopping clubs are, according to the EY study, extremely attractive to retailers. They tend to purchase online more often than ordinary internet customers. Ninety-two percent of respondents said the made online purchases regularly. They also tend to have high purchasing power. Almost half of the people who are shopping club members, 46 percent, have a net household income of more than €2,500. Out of the total respondents, that figure was only 36 percent.
The shopping clubs tend to be especially attractive to young customers. Among Gilt members, there is a disproportionate number of millennials, customers between 15 and 35 years.
The Otto subsidiary Limango is one company that has profited from this faithful clientele in Germany. Limango's turnover has climbed around 40 percent in the last year, to €129 million ($147 million). In 2015, more than 2.8 million purchase orders were dispatched. To survive in competition with bigger players like Amazon BuyVIP or Zalando Lounge, Limango concentrated on families as their target group.
Now foreign markets are the goal. The company's management team has added enterprise systems builder Marcel de Vries, whose task will be to drive the international expansion.
“Our procurement department is already highly active internationally,” Mr. de Vries said. “And with our activities in the Netherlands and Poland, we have already mastered the first steps in new markets in recent years.”
“I have no doubt that very soon we will successfully realize the further international expansion of Limango,” he said.
Even if competition in Germany is getting tougher, aggressive take-overs of the smaller shopping clubs are unlikely.
“We don't need to take over any shopping clubs in Europe,” said the HBC chief Jerry Storch. “With Gilt we already have the expertise and the best model in the sector.”