Redefining Fashion Sales & Supply Chains: Gilt Groupe, Quiet Logistics & Kiva Systems

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Designer clothing and accessories move through some of the most complex and expensive (read: not so green, either) sales and supply chain channels in the world.  Made in Asia or other third-world countries, shipped to European, Asian or North American distribution facilities and then sold through in-store or stand-alone boutiques, fashion products consume inordinate amounts of supply chain, sales and retail resources and costs.

With the global slump in high end fashion sales, major designers are increasing shedding "excess" merchandise to emerging online retail start ups, which specialize in "private sales" of discount designer clothing and accessories.  The Wall Street Journal recently had an interesting article on the space, entitled, Designer Bargains, for the Invited. These new companies strip away at least part of the super expensive distribution channels, generally taking excess goods from designer warehouses into their own facilities and selling the products in day-long sales at discount prices until the product runs out. The WSJ article cites discounts of as much as 50% on handbags, shoes and clothing.

The idea is that discreet sales online on members-only web sites is preferable to the designer than to have the stuff ending up at Marshall's.  For the start ups, margins are higher that retail, inventory risk is minimal and you can outsource your logistics operations to outside providers. The good news is that the online channels can reduce outbound supply chain and retail resource use, and lower operating costs, making fashion a lot more green, but a lot less profitable for designers.

That's what Gilt Groupe, one of the major players in the online retail fashion start ups, has done.  They struck a deal with Quiet Logistics, another start up that uses robotic technology from one of my portfolio companies, Kiva Systems.  Genius move.  Gilt can experience even higher margins because Quiet Logistics operating costs are much lower than traditional 3PL providers, due to the efficiencies inherent in the robotic technology.

As we look to green up our supply chains, companies like Gilt Groupe, Quiet Logistics and Kiva Systems are excellent examples of how significant reductions in supply chain resource consumption are not only possible but happening today.