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Gilt is closing in on Groupon’s turf. In April, Gilt quietly launched a beta version of “Gilt City,” a local deals service that offered a set of weekly deals for New York. Although City remains in beta mode and is only available to approximately one-third of Gilt’s NY membership, the well-funded company is preparing for an official launch in 15 to 20 U.S. markets.

As I was preparing to write the continuation of this post, I happened to read an article on MSNBC about Fashion Week in NYC and the mixing of elite and more common brands.  The timing couldn’t have been better.  The article explained a variety of the reasons why both the elite and more common brands were at the exclusive event together: mass-market convergence, economics of big brands, increasing brand awareness and so on.  I think a lot of these factors are at play but what it comes down to is really simple:  brands need to be everywhere and anywhere, and the more eyeballs the better.  Some might argue that it is the more modest brands trying to win the more exclusive clientele and not vice versa, and perhaps they have a point, but this trend points to an overall rethinking of channel distribution.

Much like the private shopping clubs, all brands; elite and common alike are fighting for eyeballs.  With the maturation of the Internet, brands now have more tools and resources to control their message and their distribution.  Now brands can deliver their message, not reduce their perceived value and exist on multiple channels, even if any of the particular channels might not seem like the perfect site.  Brands are reaching out to people using any method possible, hoping to gain loyal followers.

Again, who really cares?  People are able to find the products they want across multiple channels.  Shouldn’t it be that way?  Yes, that is exactly the point.  Brands are now moving to strategies where they can and will be on as many productive channels as possible, communicating and attempting to reach as many people as possible without compromising their perceived value.  This is great for consumers and for marketplace owners and entrepreneurs alike.  Consumers benefit from increased accessibility, marketplaces benefit from the increased likelihood of brands willing to give marketplaces a try and finally, entrepreneurs benefit from finding creative ways to allow brands to comfortably be on new channels.

As I browse the Internet I have noticed that more and more prestigious brands are jumping on the Internet discount bandwagon.   Most are using private shopping clubs as their mechanism for these deep, sometimes too good to be true specials.  My reference to “prestigious” brands is targeted at brands that rarely have sales, if at all, brands that utilize exclusivity as the primary emotional driver.  My first reaction was one of bewilderment: I couldn’t figure out why I would choose to fight the masses at those bi-annual 50% off sales or at the outlets where the items are noticeably wrong - why not just wait for a company endorsed fire sale?  I use the term fire sale because these shopping clubs are marking items off 40-70%, not the run of the mill 10-20% you find in the high-end department stores where these brands are placed on a pedestal.

I was amazed that these brands were committing to discounting their products and discounting them so deeply for the masses.   I did some thinking and some browsing all with one question in mind: are these brands devaluing the brand that they worked so hard to keep exclusive?   After my browsing was complete, I came to the conclusion that these brands are learning how to get the best of both worlds.  In the current economic climate, these brands are seeing the need to capture a new demographic, if not an entirely new customer base and these shopping clubs are just the platform from which to launch their consumer offensive.  By being a part of these shopping clubs and limiting their sales to a very short period of time, the brands are able to portray a sense of limitation and scarcity, playing to the consumer’s sense of exclusivity.  These clubs combine limited or invite-only memberships with deep discounts for a very short period of time to appear very exclusive which protects the branding of their clients.  The brand benefits three fold from this.  First by selling off what is most likely a surplus of product that might otherwise go unsold.  Second by capturing a new customer base, consisting of either savvy shoppers that are able to pay retail but refuse to or shoppers that are just not able to afford the retail cost of buying into the brand.  The third benefit is found in piggybacking onto the heavy promotion and extreme exposure that the shopping clubs rely on to drive customers to their door.  In the end these brands come out with not only an unscathed image of exclusivity, but also increased sales, new customers and increased brand awareness.

A good deal for everyone, but so what?  There may be larger implications that come with continued Internet distribution and with the increase of ecommerce in general, but more about that in part 2.