Rue La La is a fascinating site. And there's a lot more to Rue La La than simply it being an invitation only sample sale site. No, no, the people who founded Rue La La were a lot cleverer than that.

Now I agree, I'm speculating about rue La La here, rather than specifically having inside information, but I've seen how a lot of businesses work and I think it would be fair to say that my speculation about Rue La La is well founded.

I should also emphasise that there's nothing wrong or illegal with the way that Rue La La operates…at least as far as I know….and I'm absolutely not suggesting that there is. I jsut think the people behind Rue La La have chosen a very clever business model and want to explore it a little further for you.

Firstly, here's how Rue La La describe themselves on their website:

What is Rue La La?

Rue La La is… an exclusive, invitation-only online destination
where Members discover premier-brand, private sale Boutiques, each open
for just a brief window of time. Our focus is a well-edited collection
of sought-after offerings from the best brand names in the world –
combined with helpful service.

Membership is free. It's also invitation-only. Members shape the
community by inviting new Members – and getting a $10 Rue La La Credit
when each new friend places their first order.

OK, so we've got the first part of how to aid Rue La La in going viral.Everyone who is currently a member has a $10 incentive to get more people to join up and start spending money. No, I've not seen the prices they charge yet but I can imagine that the Rue La La commission on a sale more than covers that first $10 they have to pay out.

Here's the sort of things you might get at a Rue La La sale:

Now, a new player, Rue La La, has leaped into the fray.

And so far, I am loving me some Rue.

Today’s sample sale was Plenty by Tracy Reese.  Tomorrow, features
Cole Haan shoes and bags.  And I am desperate for the Pink Tartan sale
to begin later this week.

OK, I'm well out of contact with American women's fashions but I don't see that those are likely to be cheap items, making my thoughts about how Rue La La pays that $10 commission seem about right.

You can see that the come one does in fact work as well:

A little more on how it actually works at Rue La La here:

Rue La La

I
was invited to be a member of a shopping site called Rue La La. It is a
sister site to Smart Bargains (which is why I was invited). I just
signed up a few days ago, but I can invite others to join. It appears
they have one "boutique" for 2 days then a new one opens. (Right now
it's Kate Spade). They sell select items until they sell out. It seems
that they tend to sell out before the next designer is due to open, so
you have to act fast. The next three boutiques to open are Fendi
(4/28), Magashoni (4/30), and Cole Haan (5/2)

And here's an explanation of how Rue La La is doing in comparison with other similar sites.

As you can see, Rue La La gets a major spike around the time of
December 30th. At this time they were having a sale offering even
larger than usual discounts which can account for the rush. For the
most part Rue La La has continued to beat out Gilt Groupe but it will
be interesting to see if they can remain on top as the space grows and
competition increases.

OK, so what do I see as the business plan? How might you want to try and recreate this, whether in the women's fashion space or elsewhere?

OK, firstly you want something to sell. Needs to be perceived as high value but something where most of that value is in fact in the brand name. Designer sunglasses maybe. Women' designer clothes and shoes is a great one.

Secondly, you want it to be something where end of line stock gets sold very cheaply. That way you can make sure that you can discount from normal retail but still have a good profit margin.

Thirdly, make sure it's all done online. This will make sure that your sources of these don't mind you cannibalising their usual retail channels.

Fourthly, give people some incentive to take it viral. A $10 coupon might be enough.

Fifthly, go out to the major blogs in your sector and get them giving out the exclusive invitations….in return for that $10 coupon for each one of course.

And that's what it appears to me that Rue La La has done and very good luck to them as they do so!