After igniting the flash sales market with the launch of Gilt.com during the summer of 2007 and after growing that ecommerce business to an estimated $500mm in annual sales, Gilt Groupe is expanding their business in an unexpected way. They have recently announced the launch of Du Jour, a new digital and print magazine that is aimed at their exclusive customer base of high income individuals.
Editorial content is an increasingly popular way for retailers to increase engagement with a firm’s customers. And this is not the first foray for Gilt into editorial content. The launch of Gilt Taste was noted for the hiring of famed New York Times reviewer, Ruth Reichl, to guide the editorial policy of the new business.
But by actually launching a full content site, Gilt is expanding beyond its core business operations. But this follows a recent trend in the ecommerce space. It is not uncommon for the largest etailers to populate their sites with advertising — walmart.com, toysrus.com, and overstock.com are prominent examples. This practice is appealing because it provides ancillary income for a retailer. When site sales are reduced by the cost of goods, marketing and technology costs, as well as overall SG&A, most retailers are satisfied with an operating margin of 5%.
The impact of advertising is not necessarily trivial, as this article illustrates. 2011 may have been an outlier in the company’s financial performance because of heavy investment in the development of the Kindle Fire, but for the purpose of this post, it is important to note that Amazon generated $631 mm in net income. But the company generated $1 bn in advertising sales, which may have been the leading contributing factor that swung the business to a profit.
I am not a financial analyst, and it seems certain that my analysis is a very simple one because Amazon’s business is particularly complicated one due to its investments in product development, web service business. But it is clear that advertising is a tremendous subsidy that allows Amazon to fund future investments in growth.
I thought this was a timely post for retailers after reading about how to build a niche content site. It is by no means a quick path to fortune, but the items in this post show you how to begin.
I will write a follow-up post shortly on the engagement benefits of content in helping consumers convert on your site.