Why Hudson's Bay bought Gilt

Hudson's Bay Co. has agreed to purchase Gilt for $250 million, and CEO Jerry Storch has big plans for the concept including stores within stores and inventory sharing between Gilt and Saks Off 5th outlets.

Privately held Gilt is estimated to have close to $1 billion valuation, but the company has some barriers to success that Storch expects to break down. Returns are a particular pain point for Gilt shoppers and by the end of this month, merchandise can be returned to Saks Off 5th stores. Once there, Storch expects consumers will purchase something, driving sales from Gilt customers to the store.

In terms of inventory, "We think we can help a lot," Storch told CNBC. "We operate 460 department stores. We can purchase [inventory] together and share inventory. We have a giant inventory to pull from."

The Gilt name and concept will remain, with Gilt concept shops inside Saks Off 5th stores. "Gilt will be Gilt," he said. "They need the physical presence. It will be awesome."

It's a marriage of digital and physical, contends Storch.

"There's a false dichotomy being drawn between the online-only retailer and brick and mortar," he said. "The consumer doesn't care; she wants to choose."

Gilt brings a digital presence and younger customer to Hudson's Bay, while Hudson's Bay offers the physical showroom of the store. Currently Gilt has just one showroom in New York, Gilt by Appointment, which invites members to try on and shop apparel, shoes and accessories.

The transaction is estimated to contribute $500 million to HBC's sales in 2016.

For more:
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