Gilt City Leaves the Masses to Groupon, Skims the Cream Off the Top

As Groupon and LivingSocial scramble for first-mover advantage and launch in as many as eight new markets a day, Gilt City is taking a different approach to the group-buying market.

It’s skimming the cream off the top.

It will not blanket America with offers, but rather only enter markets where there’s enough luxury experiences and high-end restaurants for its target audience of highly educated, 25-to-40 year-olds (In other words–affluent, wealthy and plain ol’ rich people).

Gilt City is an extension of the New York-based Gilt Groupe, which provides invitation-only access to products and experiences at discounted prices. Gilt City competes more directly with Groupon and LivingSocial by offering discounts to spas, restaurants and cosmetic treatments, like Botox. So far, it’s launched in Boston, Chicago, Los Angeles, Miami, New York, San Francisco and Tokyo.

Gilt Groupe has raised upward of $50 million in venture capital, and will still have to contend with Amazon-based LivingSocial, and Groupon, which aims to raise up to $1 billion after spurning a buyout attempt by Google.

Gilt City’s President Nathan Richardson promises us it still has aggressive goals, but that its plans look different from the others. “We won’t be in a lot of secondary markets, but there’s 40 markets that have the depth we need.”

Meanwhile, Groupon and LivingSocial are in more than 100 markets each today.

“The high-end of the market is enormous,” Richardson says.

Unlike Groupon and LivingSocial, Gilt doesn’t send out a deal every day, but rather offers up to three deals in a weekly email, because “that makes it worthy of reading in your inbox.” In Chicago it’s up to sending two a week, and in Los Angeles and New York, it’s now sending two to three.

In addition to offering discounts on restaurants, spas and beauty, Richardson says Gilt is also selling experiences.

For example, on the Fourth of July in New York, it hosted a party on the retired aircraft carrier USS Intrepid, which was positioned right under the fireworks. “Not only did the offer sell out, we had three times as many people on wait list,” he says. “We have the opportunity to extend our curated lifestyle brand to events. People have come to expect us to be consistent. It’s not hit or miss. We want to make sure the email surprises our customers and is always on brand and something we feel proud of.”

To make his point, Richardson often talks about the deal’s “exclusivity,” not how deep the discount is. But why would an exclusive restaurant–which presumably has no trouble selling out–be interested in offering a discount to Gilt’s subscribers?

Richardson says it’s an opportunity for these brands to introduce new opportunities or extend its franchise to a new audience.

For instance, a new restaurant opening in New York’s Flatiron District offered a deal that introduced a new menu to the public. The chef signed the menu and visited the patron’s table for a chat. Another upscale eating establishment used Gilt to promote availability of a private dinning room.

Richardson says that in a survey Gilt conducted, customers said that 80 percent of the time they had the intention of going back to a restaurant, gym or skin-care provider at full price, and in 60 percent of the cases they did go back.

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