THE EVOLUTION OF FLASH SALE SITES
Flash sale sites Gilt.com, RueLaLa, Amazon's My.Habit.com, Nordstrom's HauteLook, and Fab.com all began under the same model: to offer their members-only customer base online sales of limited duration (often only hours, or minutes). These sites saw initial success by generating a sense of urgency – limited quantities for a limited time. As the market became saturated, did consumers realize that the quantities were not limited, and the deals were not endless?
At first it was difficult for pioneers Gilt.com to find
enough designer support to offer sales daily.
Eventually, many brands realized that it was an excellent way to
rid their inventories of aging product.
And as flash sale sites grew their membership base, it also began to make
sense for many brands to manufacture product specifically for this channel. Of course, major retailers soon followed, offering their own timed sales.
Fab, Gilt, and RueLaLa have recently been through a
significant round of layoffs in an attempt to achieve profitability. They, and many of their peer sale
sites are still heavily financed and operating to achieve scale
quickly. Al Fayed recently announced the
closing of its flash sale site Cocosa for that very reason – the ongoing cost
of building the brand to leadership was too high.
Although, memberships and sales continue to grow for most: Fab had 12 million members before opening to the public, HauteLook boasts over14 million. However, the industry’s best have been shifting their models.
Gilt is leading the pack in personalization, and mobile is the perfect avenue for this - what is more personal to us than our smartphones? Forty (40) percent of traffic is from mobile for this group of sites, and Gilt has worked hard to deliver “Your Personal Sale”. This feature is driving mobile conversions by generating a new daily sale which is selected for each individual. "Your Personal Sale" is another success story for effective use of big data.
RueLaLa shoppers no longer have to fumble with credit cards on mobile – the company added Google Wallet Instant Buy to ensure those customers coming from mobile could easily purchase. While the two-click purchase depends on the customer being logged in on an android device, with credit card information store, the results have been strong. The repeat business off of this service has been exceptional, with 50 percent purchasing again within the month.
Although Amazon has Google beat, offering 1-click purchases, Google Wallet's 2-click option is still far more elegant that navigating and typing in 20 fields on your mobile device - often while on-the-go.
Earlier this year, Fab.com shifted into an inventory-based model from a site specializing in flash sales. As the market continues to become saturated, it may be about becoming a great value-driven retailer, and less about the timed 'members-only' sale. While we would love to suggest this is purely a strategic business move based on the way Fab's customer shops, it appears that optimizing investments in warehouse space and shipping may have also come into effect. This month, the company opens its first pop-up featuring South African designs.
Flash sale sites have always based their model on a blend of owned inventory and a 'consignment' model, but the blend has consistently been shifting towards owned inventory - particularly when brands are producing inventory for these e-retailers.
As well, established retailers are using their flash sites, in part, as an outlet channel. Amazon’s Beaudoin told WWD, “we will sometimes share inventory with MyHabit.com, whose concept is after-market styles”, and indicating that the decision to do so will often depend on the brand and product. Amazon considers each of their sites, including flash site MyHabit.com, to have distinct customers.
Similarly, Nordstrom is using HauteLook, which the company purchased three years ago, to ensure their customers are able to shop with them multiple ways – whether that be through their full-line stores, the Rack or HauteLook.
The success in the ‘flash-sale’ space seems to come when sites are able to adopt some very classic principles of good retailing: establishing a market and product niche, offering your customer the right product, at the right price. And great customer service, which is what instant payment, product which is available to buy (on-hand), and personalization essentially is. It's nice to see that although shopping channels and the details of how we shop are in constant flux, great product and service still reign supreme.
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