12/08/2010 12:40 pm ET Updated Aug 11, 2011

Alexis Maybank And Alexandra Wilkis Wilson, Gilt Groupe: My First Million

Sample sales are a time-honored New York shopping tradition. For years, shoppers in the know would swarm to often underground locations, elbowing one another to snatch up couture at huge discounts. That is, until Gilt Groupe came along.

Today, Alexis Maybank and Alexandra Wilkis Wilson help men and women enjoy that "gilty" pleasure from the comfort of their own homes. Gilt Groupe, their luxury sample sale website, hosts 36-hour "flash sales" every day, featuring apparel and accessories from designers like Carolina Herrera, Judith Leiber and Thom Browne. Shoppers must "apply" for membership, and once admitted, then receive daily e-mails announcing each sale.

The online shopping spree began on Nov. 13, 2007, with the inaugural Zac Posen sale. Since then, what began as a high-end women's apparel site three years ago has blossomed into a go-to shopping destination for kids apparel, menswear, home furnishings and even vacations, with a spin-off site called Jetsetter. With the launch of Gilt City, the company has hopped on the group-buying bandwagon a la Groupon. Maybank and Wilkis Wilson -- who met at Harvard and were enlisted by founder and CEO Kevin Ryan to help launch Gilt -- are showing no signs of slowing down, having recently made their first acquisition, a San Francisco-based local deal site Bergine, Gilt now offers roughly 70 sales a week, and brought in an estimated $170 million in revenue in 2009.

Maybank: We used to attend the sample sales in New York at odd hours during the day -- that informed the idea. Plus, the two of us had that basis of friendship and trust that is important in any startup team. From there, we really used our different personalities and skill sets to start executing the idea. Alexandra comes from a background of luxury and retail and fashion, and I come from a background of e-commerce and knowing how to create online experiences and reach large audiences through viral marketing. We were the target consumer in many ways, and we wanted to create a certain shopping experience. We spent three to four months organizing for the launch, and we just divided and conquered, and spent time executing the idea, building the team and bringing the best possible experience to the members.

Wilson: We liked the name "Gilt" because there's a play on words with guilty pleasures -- shopping is notoriously a guilty pleasure -- and it also implied the Gilded Age and the sense of luxury covered in gold. When we started, we were an itty bitty start-up, and we thought "Groupe" made us sound established. We like the "e" at the end of the word just to make it seem a little more French and luxurious... a little je ne sais quoi!

Maybank: When we first started Gilt Groupe, very few of our partners were selling online directly, had websites and really understood what e-commerce could do for business. E-commerce has been now generally accepted as the way you reach customers. It's not threatening to the store environment -- it's complementary. Our sales are 36 hours, and when customers come to the site, they know what brands we're selling that day, but they don't know what's in a sale, so there's a high degree of discovery of both products and brands. A lot of our partners love that they are reaching new audiences, and they are reaching a younger segment they hadn't attracted yet. That customer exposure is what our brands really love about working with Gilt Groupe.

Wilson: Initially, a lot of brands we wanted to feature were cautious about what we were offering. They maybe hadn't sold anything online -- especially at a discount. A lot of our brand partners wanted to see what other brands we were selling on the site, how we treated photography, how our customer service and logistics worked. Once they experienced the site firsthand, a lot of CEOs were making purchases on the site. They became comfortable with the concept and realized we could tailor any online event to the particular brand.

We have a team of merchants who are very picky about what products are appropriate for our site -- everything has to be perfect quality, in perfect condition, and we like things to be on-trend so they can't feel like they're very dated. For pricing, we always work directly with the brands we're featuring. The next stage is the photography, which we've always taken very seriously. We shoot all the ready-to-wear apparel on models -- which requires models, a hair and makeup team and stylists. Then comes the whole logistics process.

Maybank: Right now, we're in our awkward teenage stage as a company, so we're starting to do things that medium-sized companies do -- focus on our infrastructure, assess the logistics and site operations. We have three distribution centers that are catering to 3 million customers and 70 sales a week, so we have to manage the football fields of inventory in a way that we are very quickly and accurately getting a purchased item to a customer within a couple days. We use Kiva robots to grab ordered items off the shelf in minutes and bring them to the packer to put in a box.

We've always responded to what our customers are asking for. In the very beginning, over 20 percent of our members were men, and they said, "Bring in more stuff for guys, or I'll unsubscribe!" So we reacted quickly and started setting up sales for them. We also heard from members that they wanted things for their home or apartment, thus bringing the home category to Gilt, and many of our members have children or went to [baby] showers, so bringing in things for kids was important. And then we heard, "If I had access to luxury travel opportunities, to insider-price hotel stays, I would definitely buy that on Gilt Groupe," which led us to explore the whole travel category that became And requests for local services like spa appointments and reservations at desired restaurants were also coming in from members in Miami and New York to Cincinnati, so that's what led us to think about pulling together local offers at highly desirable spots for Gilt City.

Wilson: With our model, what we found during the recession was that a lot of our brand partners were facing very challenging times. I can honestly say we kept many brands afloat by purchasing inventory from them. We literally allowed them to keep the lights on in their showroom.
Maybank: At this point, there are many people pursuing the same idea -- flash sales. It's a sign that it's here to stay. Even large companies have done them, although at first they tried to push it to the side or keep it from happening. It's flattering to see. It means something's working.

The original version of this article appeared on AOL Small Business on 12/08/10.