Nordstrom Acquires Hautelook for $270 Million: What It Means for Department Stores and Discounts

If someone says “flash sales,” your first thought might be of the Gilt Group sites in the same way that “group buying” immediately conjures the thought of Groupon.

While Gilt and Groupon may be top of mind in their categories, here’s another reminder that some very profitable things are happening with brands who have marketshare, even if they don’t lead in mindshare: Hautelook, the flash sales site which launched in December 2007, was just acuiqred by Nordstrom for $270 million. {TechCrunch}

This is mostly a stock deal – $180 million in Nordstrom stock, with a $90 million potential earn-out over the next three years. It’s a smart move for Nordstrom though, and one that we suggested more department stores look into on a guest post at the Business of Fashion last year.

Well, not specifically an acquisition, but certainly a focus on developing the type of online sales websites that are popular with wealthy online shoppers. In this case, an acquisition is likely a better choice than being trying to develop a competing online presence around Nordstrom Rack. Neiman Marcus recently took that route with it’s Last Call brand, but  other department stores like Saks and Barneys continue to keep their discount brands limited to suburban outlets.

While there are sure signs that the luxury market is coming back, the revival is coming from younger, less wealthy shoppers who may be introduced to luxury brands through sites like Hautelook or Gilt that offer items at lower prices. The flash sale sites have often said that consumers introduced to brands through their sites often go on to make additional brand purchases after the sale ends.

For department stores looking to grow revenues, it increasingly just makes good business sense to throw out old thinking that bargain shoppers aren’t as valuable as those who buy at full price. By developing or acquiring online properties that capture a significant part of that audience, they’ll likely find themselves increasing sales at every place in the shopping cycle.

Which stores and websites are we likely to see on future acquisition or partnership press releases? Gilt Group is valued somewhere between $400 million and $500 million making it a more likely candidate for an IPO, RueLaLa was already acquired by GSI commerce for $350 million, which leaves Ideeli and Beyond the Rack as the next largest and most likely targets.

As far as retailers, Saks, Barneys or Macy’s (who owns Bloomingdale’s) are most likely. Macy’s has the money and the traffic to try to develop their own presence, so we’ll take them out of the potential buyer pool; Saks cut a lot of underperforming stores and has decided not to open many more, so developing their own online property is probably not going to happen, but acquiring an already successful one could make sense; finally there’s Barneys, which has had several well publicized staff changes aimed at increasing sales, and online sales have been designated an area of particular importance.