Entry Strategy for Gilt Group in Singapore

Gilt Groupe is a company that activates in the online retail business, mainly in the Iollowing
industries: Iashion, interior design and well-being. It is a company whose business model is based on
'Ilash sales. 'Flash sales is about oIIering a limited number oI products Ior a limited amount oI time
at attractive prices. In the case oI Gilt, the prices are more than halI below the market price.
Given the Iact that Singapore is a politically stable country and that it would be Iairly easy to
repatriate capital and earnings we recommend an entrance strategy with 100 ownership.
History and legacy of company
%he company was established in 2007 and by December 2008 the company has already hired 80
employees. Following a Iast growth rate the company ended up employing up to 400 employees, at a
rate oI approximately 50 people every month. Gilt Group is a company that puts its strength in human
resources and all the ones that are hired have to have considerable results in the past, they have to have
experience in the industry and most importantly they have to match with the Guilt Culture.
%he three main characteristics that set the business apart are the Iollowing:
O embers Only Shopping-Gilt Groupe provides instant access to top designer labels at a 60
oII retail. A member can Iind something new every day: Ior women, kids, home and well-being
services as well as travel packages.
O First Come, First Served- the sales take place on the website: www.gilt.com and the Iull
collection is available Ior sale once the sale starts. %he sale starts every day at 9p.m.
O Advance Preview: customers will know what brand is going to oIIer products Ior sale. All the
designers give a short bio oI themselves, together with a short preview oI selected items that
will be oIIered Ior sale.
#easons for Whole Ownership Strategy
When entering in a new market a company has two options: direct control or indirect control. %he
nature oI the business that Gilt Group conducts allows direct control oI resources at a competitive price
and reasonable costs, thereIore indirect control oI resources, while it would be a method that implies
less hassle it would be a choice that does not allow as much Ireedom and speed oI decision making and
implementation as direct control would. Direct control and indirect control is in Iact a choice between
integrated channels and independent channels. %he advantages oI having independent channels are
lower perIormance costs, lower risks, less capital needed, high local knowledge and credibility. On the
other hand, the disadvantages that are Iaced are less market inIormation Ilow, greater coordinating and
control diIIiculties and motivational diIIiculties. II the channels are integrated then the advantages
would be: having planning and control resources, Ilow oI inIormation, a Iaster market penetration and
a visible sign oI commitment. %he disadvantages are that marketing costs are high, the risks are high
and the company might have to take time to build credibility with the locals.
#isks that could be faced
Consumer education
In the case oI Guilt, one oI the biggest risks that it Iaces is that it has to build credibility within the
locals as well as that it would have to work on a behavior change oI a customer that is used to being
close (approximately 30 minutes by car) to any shopping place. For Singaporeans going shopping in a
physical place is a Iorm oI entertainment, as Singapore is not rich in Iorms oI entertainment. Gilt will
have to market the Iact that shopping online is also a Iorm oI entertainment. oreover, by looking at
the data we can see that lately online retail, particular in the Iashion industry has had a Iast growing
rate which gives us reasons to believe that having an online store might not present serious issues to
being accepted as a distribution channel.
One important Iact about Singapore is that one in three persons comes Irom abroad and that there are
7000 multinational companies that are present in the Singaporean market. %hese two Iacts means that a
majority oI the customers might have already had exposure to Guilt in the USA, where our business is
a sound success, or in Japan, where again the company has had a Iast steady growth rate since it has
been established in 2009.
inancials
stablishing Guilt does not require a high investment oI capital, which is why it is even more
recommended Ior Guilt to opt Ior a wholly ownership entry strategy. Guilt is an online store, meaning
that it does not have to own a store, in a physical Iorm, in a location that requires a considerable
renting space, as well as that it does not have to invest aindecorating the space, which means that the
initial expenses Ior the distribution channel are low and it is viable Ior Guilt to go alone and start its
business in Singapore. oreover, the nature oI the business is such that it does not require a high
amount oI stock. %here are 2-3 brands that go on sale every day, and the number oI items is limited,
meaning that because the company has a high turnover oI goods. %hat means that the company does
not have to spend a high amount oI capital on storing the items, so it can Iocus its resources on hiring
the right personnel.
Operations
Gilt Group would operate through its website, as a distribution channel. %he buyers will Iocus on
getting the best prices Ior the company and choosing the brands towards consumers Ieel the most
willingness to buy. %he items will be stocked in the Northern part oI Singapore where land is cheaper.
%he oIIice can also be established in an area where real estate has lower value.
Personnel and Marketing (2 in 1)
One risk that the business Iaces is the availability oI appropriate personnel. We saw at the beginning oI
this sub-chapter that hiring the right people is important Ior Gilt Groupe and there is the question iI
such talent exists in Singapore. We believe that there is a chance oI tapping into the population oI
expats wives. xpats wives are in the majority oI the cases well educated, they have had a considerable
work experience, and their social status requires them to be up-to-date with the Iashion industry. ost
importantly, they can be used as marketing tool, as they can tap into their own network and reach the
consumers that Gilt is targeting.
Gilt Groupe in the Context of Globalisation- AAA Strategy. lexibility
When entering in Singapore Gilt Groupe will add one more country to its list oI overseas locations,
thereIore increasing the need Ior a global strategy. %he nature oI the business oI Guilt Groupe is such
that it Iocuses on the particular needs oI customers. Once in Singapore the company will Iace new
cultures and new religions. Up until now it has done a good job at adapting at the Japanese customs,
thereIore we believe this is one Ieature that could leverage the business. Focusing on the local needs it
can choose the brands and designers that are most desired Ior a particular market. %hereIore, we
recommend that Guilt Groupe nails only one oI the triple A strategies: Adaptation. Focusing on
Adaptation will leverage the business model as it would let it Iocus on Ilexibility, and this is what it
needs the most in order to succeed.
From the experience with the American customers and the Japanese customers we can tell that this is a
business that it is easy to customize to the local needs oI the customers. %he items that go on sale on
the American website and the clothes that are on the Japanese website are not the same and they do not
have to be. %he buyers oI the company can choose the brands that are the most appropriate Ior the
local needs and the brands that are the most open to negotiate Ior a good price and proIit margin.
onclusion
%o conclude, as seen in the previous two chapters, the country and the industry that we want to enter
allows us to enter with a wholly owned operation strategy. %he country presents enough political
stability, low regulations, a healthy economic environment and more importantly we project existing
demand. %he industry is attractive: the latest developments in I% & Communications in Singapore, a
high number oI wealthy potential consumers and consumers that might want to look wealthy makes it
viable Ior Gilt to consider entering the market.
A 100 ownership implies great commitment oI capital and oI managerial eIIort, but in this case it is
the option that makes sense and it is worth implementing.