Leadership by Geoff Colvin

Susan Lyne lands at Gilt

September 16, 2008: 2:43 PM ET

Since Susan Lyne made a big name for herself at the top of ABC Entertainment and then Martha Stewart Living Omnimedia (MSO), her move to the CEO position at tiny Gilt Groupe seems to be a head scratcher. Have you heard of this year-old startup? I hadn't. My younger, fashionable colleagues say it's a big thing: an online marketplace of excess luxury goods that is already shaking up the fashion world.

"The business model is brilliant," Lyne said Monday when she phoned to tell me about her job change. Gilt, she explained, "gives high-end vendors a chance to sell excess goods and still preserve their brand equity. No bricks and mortar." Gilt sells men's and women's and children's clothing and a bit of jewelry. What's next? "We can go into home goods and I would say..." She paused. "I'm hesitant to flag competitors." "Maybe travel. Think of all the areas where there's excess inventory."

Amidst the current squeeze on America's consumers, there's lots of excess inventory -- and still enough buyers, Lyne insists. Gilt's customers, who must sign up as members, are mainly young professionals "who are high earners and do have disposable income, even in this economy," she says. Gilt's online sales, by invitation only, last 36 hours and feature styles from a single designer, with prices up to 70% off retail. So Gilt is sort of a mini-eBay at the high end. The competition is formidable: eBay (EBAY) is No. 1 in clothing on the Web. And then there are online retailers such as Vente-Privee, eLuxury, and Bluefly.

Considering Lyne's four-year stint as Martha Stewart's CEO, her move actually makes sense. At MSLO, she oversaw a broad merchandising business that has been crippled by its partnership with flagging Kmart (SHLD). To compensate for that, Lyne expanded the Martha brand to new categories and retail outlets such as Macy's (M), Wal-Mart (WMT), and KB Home.

She never imagined landing at Gilt, though. "When I left Martha Stewart, I was not thinking of going to a startup," she says. That was June. She got a call from Matrix Partners' Nick Beim, who is Gilt's financial backer and also a member of its board. Lyne had known Beim 25 years ago when he was a teenager; she and her late husband, George, had a summer house in Riverdale, N.Y., right next door to Nick and his parents. "He was the smartest kid," she recalls. So when he pitched her on Gilt, she listened. "You're going to get a lot of calls where people want you to fix other people's mistakes," he told her. "This is different. This is building something from the ground up."

In fact, Lyne had another very tempting offer: to run Harpo, Oprah Winfrey's company. She won't dish about her meetings with Oprah. Why didn't Lyne jump at that opportunity? Oprah is moving her company to the Los Angeles area, and Lyne wants to stay in New York. And think about it, after working for Michael Eisner at Disney (DIS) and then Martha Stewart, wouldn't anyone long to build a company in her own image instead of somebody else's?

P.S. When I wrote about Lyne in June, I suggested that she might become CEO of Oprah's new cable network, OWN. I was wrong -- but close. Turns out, Lyne had been talking with Oprah about running Harpo, the umbrella company for her multimedia empire.

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Pattie Sellers has written more than 20 Fortune cover stories including "Marissa Mayer: Ready to Rumble at Yahoo," "Muhtar Kent's New Coke," "Oprah's Next Act", "The $100 Billion Woman" (Melinda Gates), and "Gone with the Wind" (Ted Turner). She co-founded Fortune Most Powerful Women and oversees the Fortune MPW Summit, the preeminent gathering of women leaders in business and beyond—and programs such as Fortune MPW Entrepreneurs and the Fortune-U.S. State Department Global Women Leaders Mentoring Partnership. Pattie also develops Live Content across Time Inc. Her blog, Postcards, is about how power players lead and navigate their careers. Pattie won Time Inc.'s prestigious MVP award for her performance in 2012.

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