GSI Commerce acquires private sale site RueLaLa.com

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E-commerce services provider GSI Commerce Inc. has agreed to acquire Retail Convergence, operator of private sale e-commerce site RueLaLa.com, for up to $350 million.

The transaction includes a $180 million pay out at the closing of the deal and an earn-out of up to $170 million based on Retail Convergence's performance in fiscal year 2012.

While this is GSI's first entry into online selling, the move is a continuation of recent moves to expand the company's offerings. In September, GSI acquired certain assets of Internet marketing agency Pepperjam, which operates an affiliate marketing network and offers search engine marketing and online media planning.

On Tuesday, GSI also reported third quarter financial results, including net revenues totaling $190.3 million, up from $186.8 million during the same period last year.

The deal for Retail Convergence “fits into our strategy of providing more online services,” said Fiona Dias, EVP partner strategy and marketing at GSI. By being able to offer brands and retailers the ability to distribute merchandise through  RueLaLa.com, “it will help our clients to sell online effectively and engage new segments of customers,” noted Dias.

She expects “tremendous interest” from marketers, who are looking for new ways to reach consumers. “There's been a lot of hand wringing from marketers because the stuff that used to work isn't working as well,” Dias said. RueLaLa.com offers brands and retailers with merchandise they are looking to move a unique way to engage consumers virally – you have to be a member to shop and you have to receive an invitation in order to become a member – as well as exciting – RueLaLa.com sends members an e-mail everyday at 11 am highlighting the brands on the site that day.

After considering whether to build its own private sale Web site, GSI decided to acquire RueLaLa.com because “it has such a head start in the marketplace and tremendous traction,” said Dias.

RueLaLa.com launched in April 2008. Today, it has more than 1.2 million members and its net revenues totaled $28 million in the third quarter of 2009. In the past 18 months, it has featured two-day private sales for more than 300 brands.

“We create an environment where brands want to be showcased,” said Stacey Santo, SVP of marketing for RueLaLa.com. The site photographs all the merchandise itself, for example.

As a result, RueLaLa.com acts as “an additional marketing vehicle for our brands,” she continued. Many brands, for instance, report increased traffic on their own Web sites after holding a sale on RueLaLa.com, Santo noted.

GSI's deal for Retail Convergence also includes the SmartBargains.com Web site, which sells off-price merchandise.

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