HBC selling Gilt Groupe

Flash sale site Rue La La said Monday it will buy rival Gilt from department store chain Hudson's Bay as it seeks to fortify its presence in the world of online discount luxury.

Hudson's Bay, which operates Saks Fifth Avenue and Lord & Taylor among other chains, bought Gilt for $250 million US in 2016, and created Gilt shops inside its discount chain Saks Off Fifth. At the time, Hudson's Bay touted the deal as a way to rev up its online engine, but it failed to deliver a big benefit.

The terms of Monday's deal were not immediately disclosed.

The new company will be called Rue Gilt Groupe, though Rue La La and Gilt will still operate their sites independently. The combined company expects to reach about $1 billion US in sales with a total of 20 million customers.

Rue La La is owned by privately held Philadelphia-based e-commerce company Kynetic, which also owns Fanatics and ShopRunner.

In a phone interview, Michael Rubin, executive chairman of Rue La La and founder of Kynetic, said the two businesses complement each other, though Gilt caters to a higher-income shopper.

Each site gets about 60 per cent of its sales from mobile devices. Rubin noted that there's only a 15 per cent overlap in customers but most of the sites' suppliers are the same. The combined company will be able to have more power to negotiate better prices and better quality of goods, he said.

The plan is to merge Gilt's distribution centre with Rue La La's, both of which are based in Lexington, Kentucky. Rubin also said he believes the combined company will do an even better job in personalizing offers to shoppers.

"I believe there is huge growth ahead, focused on digital," said Rubin.

He says he expects to hire more than 150 workers to run the Gilt business in New York, Boston and Kentucky as well as other sites across the country.

In a statement, Hudson's Bay said that the move will allow it to "focus time and resources on growth drivers that will have the greatest impact on our results."