GSI Commerce announced it will acquire Retail Convergence, which operates RueLaLa.com and SmartBargains.com. Rue La La was launched in April 2008 and is a members-only site offering premier brands at discount prices during two-day private sale events. SmartBargains.com was launched in 1999 and is a consumer marketplace for the sale of off-price merchandise across a wide cross-section of categories.
GSI Commerce powers ecommerce sites for some of the largest retail chains. The Rue La La acquisition lets it offer clients "access to a new way of selling opportunistic inventory in a manner that enhances their brand image and further drives consumer engagement."
The acquisition shows further blending in ecommerce with a service-provider now owning a "secondary-market" marketplace. Over the summer, secondary marketplace Liquidity Services acquired multi-channel eBay seller Dyscern, and eBay is running its own "Daily Deals" and adding online outlet stores in Germany and UK.
Flash-sales are red-hot in the retail industry. Gilt.com, Rue La La's competitor, has expanded its offerings to Gilt Fuse (less expensive fashion for younger women), Gilt Man (fashion and gadgets for men), and JetSetter (travel). And Woot.com is beta testing Deals.woot.com, a "daily deals" aggregator.
The press release makes it clear GSI's acquisition of Retail Convergence was done in order to own RueLaLa.com, whose membership has grown to more than 1.2 million members in 18 months, of which approximately 10 percent visit the site daily. GSI could see firsthand how successful the invitation-only shopping site had become: RueLaLa uses GSI's email marketing services.
GSI CEO and Chairman Michael Rubin said in the company's press announcement, "We are excited to enter the private sale market with industry-leader Rue La La. We believe this new way of shopping will continue its remarkable growth trajectory, based on its benefits to brands, retailers and consumers. Rue La La's short, intense events are entertaining and engaging. They have proven to be an effective solution for brands and retailers to sell significant opportunistic merchandise in a compressed time period."
The transaction is valued at up to $350 million, including $180 million at closing (50 percent cash, 50 percent stock) and an earn-out of up to $170 million. At the end of September 2009, RCI had cash of $7.5 million and no debt. In 2010, RCI is expected to generate at least $230.0 million of revenue, $7.0 million of income from operations and $15.0 million of non-GAAP income from operations.
