• Wall Street Journal, Friday, July 10, 2009 8:41 AM

Online stores that offer short, intense sales of designer apparel are attracting increasing numbers of shoppers, largely through word of mouth, as well as venture capital that the companies will use to expand their services into new categories. Companies such as Gilt Groupe, RueLaLa and HauteLook offer daily "members only" sales of limited merchandise with constant inventory updates that create a sense of urgency to buy, Shira Ovide and Vanessa O'Connell report.

The retailers' marketing efforts center on email blasts to members. The sites keep a lid on inventory spending by carrying a limited number of styles, which are often off-season, and garner margins as high as 35%, trouncing even Amazon's 25%.

The market for private-sale retailers, says one investor, is "very frothy." The two-year-old Gilt, which recently attracted a $40 million investment from two venture capital firms, is valued at $400 million. It plans to branch out into hotel packages, as well as into clothing and accessories priced at less than the typical $250 to $400 for its designer items.

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