* Discounts would depend on Klout score
* Gilt sees as extension of word-of-mouth strategy
* Gilt hoping to go public later this year
By Gerry Shih
SAN FRANCISCO, March 5 (Reuters) - Over the past year, Gilt Groupe, the luxury flash-sales website, has tried to finally turn a profit by listing its goods at full price, partnering with a lifestyle magazine and even laying off the head of one of its men's clothing divisions.
Now it's trying something new: Going viral.
The company announced Monday that it would offer a week's worth of sales in partnership with Klout, the service that assigns social media users a number between 0 and 100 based on how much influence they wield on platforms like Twitter and Facebook. Klout users can also see which topics they are deemed influential in, and who most often re-tweets their content.
Under the deal, influential Klout users get access to Gilt's flash sales at varying discounts: the higher a Klout user's score, the steeper the discount. The idea, the companies said, was to reward "influencers" on the Internet - a frequently retweeted fashion writer with thousands of Twitter followers, for example - who have tweeted about a Gilt purchase or experience, and thus indirectly helped funnel business to the website.
Klout users who take part in Gilt's deals will not be financially rewarded for tweeting about them, the companies stressed.
"If an influencer has the ability to promote a Gilt product, service or experience and that leads to spending in e-commerce, then you'll be seeing us doing a lot more of this," said Andy Page, the President at Gilt Groupe.
The promotion with Klout, a hot San Francisco startup, comes at a critical time for Gilt, which is hoping to go public later this year. Even though it took a $100 million investment from Softbank and Goldman Sachs in 2011 at a lofty $1 billion valuation, Gilt has yet to prove it can make a profit.
The company, once heralded as the next darling of e-commerce, has also been trailed by rumors of management turmoil and recently laid off about 80 employees.
To demonstrate its growth potential to investors ahead of an IPO or a potential buyer, Gilt has expanded aggressively beyond its traditional business of offering luxury women's clothing at a sharp discount. It now offers deals on men's clothing, food, travel packages and full-priced clothing.
A LOPSIDED MARRIAGE
But simultaneously managing growth and the veneer of exclusivity may be incompatible, according to Sucharita Mulpuru, an e-commerce analyst at Forrester Research.
"For a brand that had built itself on exclusivity to then really engage in outright social tactics like using Klout to spread the word is an interesting about-face," Mulpuru said. "It's very different from where they had started, from being very much behind a firewall, from having to be in-the-know and being handpicked by your friends to get an invitation. It was very different from the hyper-viral approaches that's causing businesses to explode now, like Pinterest."
If anything, Mulpuru said, it's a lopsided marriage in favor of Klout, a smaller but fast-growing startup that's hoping to convince marketers that its algorithms, combing through 75 million social media users, could yield valuable data.
Last year, Klout helped Audi identify a thousand of the most influential people who tweeted about the carmaker, and sent them free Audi mugs and flashlights.
The San Francisco startup is now hoping to expand into mobile, so that its users can receive deals - or open doors - at local establishments just by flashing their smartphones.
"We're evolving it to the point where your Klout can be a passport to the world," Klout Chief Executive Joe Fernandez said. "You can show it at a restaurant and potentially get a free dessert, or you go to a concert and get access to the VIP area."
If the Klout promotion this week proves to be a success, said Page from Gilt, the company is considering expanding the concept to further tailor numerous, smaller-scale sales to collaborate with not just the Internet's mega-celebrities but also with the merely semi-famous.
"Say there's someone that has 30,000 followers, we could launch a sale for that targeted group," Page said. "We'll explore a lot of different things."
He noted that Gilt has amassed its following of 3.5 million people through word of mouth instead of paid advertising. The deal with Klout, he said, was the logical next step in its expansion.
"In order to grow Gilt, we've always relied on friends telling friends," Page said. "This is quite consistent with our heritage."