Softbank

Banks go shopping in online luxury

Isaac Mostovicz writes that investment banks are securing stakes in lucrative online luxury businesses...

The huge success of online luxury shopping has drawn some of the big names in the banking world. Goldman Sachs and Softbank, a Japanese investment bank, are two of a group of investors providing £138 million in financing to Gilt Groupe, the US luxury fashion website.

Since 2007, Gilt Groupe has been selling time-limited discounted luxury items on its website, and has grown to become the icon of exclusivity in the online world.

Goldman’s financing of Gilt represents an interest by big investors to secure stakes in the fast-growing internet companies, as we saw with their investment in Facebook earlier this year. In February, JPMorgan also secured a 10% stake in Twitter and were looking to invest in other start ups including LivingSocialand Zynga. For Softbank, funding Gilt’s subsidiary in Japan – the only country outside the US where Gilt operates – will give the bank greater contact with Japanese Internet users. Softbank is the exclusive carrier of Apple Inc products in Japan, meaning exclusive rights to the iPhone and iPad, on which people will visit the Gilt website.

Private sale sites are clearly making a buzz, with Amazon making a move into the sector with the launch last week of its own members-only fashion site, MyHabit.com. However, analysts say that despite the popularity of these sites, they are unlikely to be making vast amounts of money due to the big investments being made in huge marketing drives and technology. The investment banks must see a definite future in this direction though, which is somewhat strengthened by the 3.5 million registered members for Gilt. The way forth is online, where the possibilities for expansion are endless.

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