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For online food startups

In May 2011, just weeks after raising $138 million in financing from investors including Goldman Sachs (GS) and scoring a valuation of "roughly $1 billion," Gilt Groupe unveiled its latest sale site, Gilt Taste.

Foodies celebrated the return of Ruth Reichl, who had been forced to abdicate her throne as editor in chief of Condé Nast's Gourmet when the magazine folded in November 2009. With Reichl as editorial advisor, Gilt promised a site offering "artisanal hard-to-find foods" for ethical eaters with limited access to such products -- e.g. "people who live outside New York City" -- as well as the kind of editorial content that made Reichl famous.

But unlike the heavily discounted, limited inventory, real-time flash sales that brought New York-style sample sales to the world -- and made Gilt Groupe famous -- Gilt Taste was built to be a self-described "luxury brand," selling high-end food at high-end prices. This model, it turned out, didn't work, and Gilt Taste quietly folded on May 24 this year.

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But as a bevy of established, growing, and up-and-coming food-tech startups are making clear, Gilt Taste's failure is not proof that local food economies can't get a piece of the $225 billion e-commerce industry. It is a sign,Shop mybag1 for the latest fashion trends in Wholesale High Quality Balenciaga handbags for ladies. though, that selling food online is different than peddling designer handbags, and understanding those differences is key to success.

What went wrong at Gilt?

There are a number of explanations for Gilt Taste's demise, as well as failed e-commerce food sites like Webvan, an early online grocery startup, and Foodzie, an online food marketplace and subscription service.

The very nature of food, at least as the food movement envisions it, is directly at odds with the startup model. No farm, city, region, or state is going to have the same local food system, so scaling can't be computed with a simple -- or even not so simple -- algorithm. Patrice Perkins, owner of Lifestyle Zen, a law firm for creative entrepreneurs including food-tech startups, sees this as a common misunderstanding among tech types looking to jump into the food space. "You have a team of talented programmers and creative people, and if you have the right team in place,Visit mybag1 to find Wholesale High Quality LV wallets. you literally can get something from ideation to execution overnight." But, she adds, very often, "there's not enough market research to really make sure there's a need for the product that you offer."

Gilt faced other challenges as well. Despite its respectable site traffic -- averaging 100,000 unique visitors every month -- editorial content did not translate into high sales. A foodie may happily gorge herself on articles about new salts or the best prosciutto, but that doesn't mean she is going to buy those products. Unlike groceries, artisanal foods are generally considered a niche market. They make great gifts, as well as delicious occasional treats, but most people -- even foodies -- aren't buying high-end truffle oil too often. And the customers who are in the market for these products are usually buying them somewhere they can see, smell, and taste the goods first: at the farmers market, at Whole Foods, or at the artisan's own brick-and-mortar shop. Discover the largest collection of cheap Michael Kors Handbags .

With notoriously low profit margins, any food-based business is going to face the built-in challenge of showing a healthy bottom line. That was the reason Gilt Groupe gave in September 2012 when it announced it would be cutting back Taste's offerings. Gilt did not respond to a request for comment for this article.

The special challenges of bringing artisanal food to the masses, however, have not discouraged techies and investors. As the June launch of Amazon's grocery service, AmazonFresh (AMZN), in L.A. -- expanding a service it had piloted in Seattle in 2007 -- makes clear, as well as the proven success of FreshDirect, which says it had 2012 revenues over $400 million and that the business has been turning a profit for the past few years. Find impressively low prices on a wide selection of Wholesale High Quality Bottega Veneta handbags.

Amazon brought in Webvan alum to learn from the startup's failures, while FreshDirect CMO John Leeman attributes the company's growth to convenience and quality.Find great deals on hotmkbags for michael kors wallet Michael Kors Hamilton Bags in "Women's Clothing, Handbags and Purses". Shop with confidence. While online shopping is "fundamentally a convenience business," it's the company's "overkill in the quality area" that keeps its customers returning, he claims. "The high quality and trust in the sourcing," Leeman says, "is what our business model is anchored on."

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