By  on December 8, 2011

NEW YORK — Focus on your product initially, not necessarily on advertising.

That’s the advice Gilt Groupe founder and chief executive officer Kevin Ryan gave to entrepreneurs who were making pitches to potential investors at FashInvest’s Second Annual Capital Conference on Wednesday, held at the Fashion Institute of Technology. Ryan, who was the luncheon keynote speaker, was also the first inductee into FashInvest’s Hall of Fame.

“I would discourage any Internet startup from advertising in the first year. You must focus on product. The product has to be good enough for people to tweet and the press to cover,” Ryan said.

He explained that Gilt was able to build its membership virally, via e-mails and word-of-mouth. “Once you know your customers, then [you] advertise,” Ryan said. He noted that once firms get as large as Gilt, viral marketing often reaches a point of diminishing returns after which there is a need to advertise to reach out to new members.

According to Ryan, because of the sign-in requirement, the flash sale model allows the site to gather data about its users from purchases made to what products are looked at and even size range. That enables Gilt to target members with e-mails geared towards their tastes and preferences.

One difference between male and female shoppers has to do with shipping.

“Women are irrationally obsessed with shipping. Men don’t care,” he said.

Ryan explained that an item may sell for $100 at Gilt, compared with $250 to $300 at a store. While men wouldn’t question a $4 shipping charge, women would think twice about it.

He also noted that while mobile shopping is up, what one doesn’t hear about is how much was sold through Facebook. “You never see that as it never happened. Facebook underdelivered on selling,” he said.

Marty Staff, the breakfast keynote speaker who has held C-level positions at American Apparel, JA Apparel, Hugo Boss and Calvin Klein, told the entrepreneurs to put some entertainment into the shopping experience and “love what you do.”

Staff’s pearls of wisdom:

• It’s better to say I don’t know and find people who do. Talk about what you do know;

• If you can’t say what you’re selling in a few words, then you really don’t know. Calvin Klein sells sex. Ralph Lauren sells the English countryside;

• Every great business is replicable, except where there is a nonreplicable competitive advantage, and

• If you compete solely on price, you will always lose.

In the morning discussion on the direct-to-consumer digital experience, Lawrence Lenihan, founder and managing director of FirstMark Capital, observed that the fashion industry approaches digital as a checklist, noting that it’s on Facebook and Twitter. He reminded brand builders of a key positioning point: “A brand is a conversation. What kind of conversation do you want to have?” Think about what you want the brand to say and how “the brand” should say it, he explained.

In the afternoon discussion on insights from entrepreneurs who also invest, designer Steven Alan spoke about shifting gears and thinking outside the box, using his representation of 20 designers through Steven Alan Showroom as an example. Julie Macklowe, a seed investor in BaubleBar and founder and ceo of vBeauté, spoke about running profit-loss spreadsheets for each store she contemplated doing business with (she couldn’t get the profits she needed for vBeauté at one retailer and chose to go with a competitor).

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