Flash Sales. It’s a retail business model that leverages the convenience of e-commerce, playing on a consumer’s emotional response to seeing the word “sale” combined with the thrill of an impulse buy. Especially a good impulse buy. And it’s been successful enough to survive the recession and live on. But with the new omni-channel imperative and expectations of the shop-anywhere, shop-anytime consumer, where do flash sales fit in?
It begins with an offer… finding us on email, online ads, Facebook, designed to whet our appetite with exciting invitations from pure-play online retailers (e-tailers). Tempting us with too-good-to-be-true prices on exclusive products from some of the coolest and most well-known brands and designers. The members-only model provides rich data so offers can be personalized, appealing to our likes, preferences and behavior, significantly increasing the likelihood of us clicking and converting. The only catch is time – in order to get our hands on that wow price, we need to click and buy - now.
The rise of the flash sale phenomenon
These are flash sales, creeping into our daily online lives and inboxes, popping up out of nowhere it seems. Originating in Europe in 2003 to much success, the phenomenon made its way to North America in 2007, a questionable time as the Great Recession was looming. Despite investors' doubts of long-term success, this innovative e-commerce business model continues to claim a significant stake in the retail landscape.
2007, welcome to America where times are tough
First introduced in Europe around 2003 by French-based pioneer vente-privee, flash-sale sites were eventually popularized in 2007-2008 in the U.S., coincidentally right around the time when the global economy was crashing. Some considered it poor timing, yet companies like Gilt, Rue La La and Zulily launched anyway, as members-only sites offering limited-time discounts on overstock designer goods. Behind the scenes many fashion brands were thrilled as they were desperate to liquidate large quantities of excess inventory due to the failing economy.
Apparently the combination of the emotional appeal of members-only exclusivity with the practical appeal of affordability during a financially sensitive time, all wrapped up in a nice bow through the convenience of online shopping, was a winning recipe.
Early 2010, things are looking up
By early 2010, the marketing phenomenon of flash sales had grown into an international, highly profitable business model. With customers becoming more aware, informed, and more confident in the security of online shopping, they saw the value – and thrill – of being a little bit patient and waiting for these companies to offer exclusive items at unbeatable prices.
There proved to definitely be a prime target audience who knew the game and were more than willing to play, and in fact, industry thought leaders and analysts projected impressively high 5-year sales forecasts through to 2015.
2013 the bubble seems to be deflating
By the end of 2013, excitement seemed to be waning following a year that saw many flash-sale actors on the digital retail scene consolidate, with a large number of wannabes struggling to find their place in the market. Leaving believers scratching their heads, wondering if flash sales were simply just another ‘online bubble’ or ‘blip on the screen’ as direct consequence of the 2008 global economic crisis. Was this the beginning of the end?
2015 and beyond: Brands and retailers are back in the game
The situation has changed, and flash sales sites are losing their luster for several reasons. The economy has recovered; retailers have learned to better market and merchandise their e-commerce offering; and the consumer, who is bombarded with online offers, is beginning to question just how good of a deal is that time-pressured flash sale?
Retailers have learned the ‘flash sales’ lesson and are including this new sales channel as part of their omni-channel strategy. Discounts have become a standard part of doing business, using online channels to promote 30%-50%-75% markdowns on old and new items, sometimes exclusively in-store, sometimes exclusively online.
Essentially, the shift to omni-channel is becoming a key success factor for retailers and e-tailers in order to meet the demands of the new consumer. The power of a really good sale across any channel and touchpoint will take away a lot of the appeal of a time-sensitive offer. And with retailers getting more intelligent in their advertising, reaching out to customers at the right time on the right channel, sometimes with their own flash sales, it’s a powerful combination that is driving sales online and offline.
Major flash-sale site players including Gilt, Rue La La and Zulily have chosen to expand in order to boost profitability, adding their own exclusive private label merchandise. Gilt even went back to basics opening brick and mortar locations.
The onus now appears to be on flash sale sites to adapt in order to compete with more traditional retailers who are embracing e-commerce and leveraging it to build mobile and in-store strategies that create seamless brand experiences across all touchpoints. Something customers have come to appreciate – and expect, and a vital missing ingredient in the current flash sales model.