Brands should avoid overuse of flash-sales sites: Shop.org 2011

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Retailers should only use flash-sales sites periodically because overuse can be detrimental when they unnecessarily discount products that aren't excess inventory, said Ben Fischman, chairman and CEO of Rue La La.

Fischman also said that brands should use their e-commerce sites as exclusive destinations for recently launched products and sales, during a keynote discussion with Sucharita Mulpuru, VP and principal analyst at Forrester Research, at the Shop.org 2011 Annual Summit in Boston.

“Our partners' sites need to be their flagship stores,” he said. “If I had a full-price brand and owned my e-commerce site, I'd launch new products on my site first. Their sites are for selling full-price. Trading down to sell at a discount is detrimental to their brands.”

Flash-sales sites are effective for retailers who use them as a marketing channel that can deliver a “unique experience, and not just to move excess inventory,” he said.

Exclusivity and the experience of purchasing limited-sale items is what drives consumers to flash sales, added Fischman.

“I'm a huge fan of Amazon.com. But we're never excited to go to Amazon.com. You've got to create reasons [for consumers to shop] beyond, ‘I know they'll have it,'” he said. “Great retailers have always created excitement to get you to come into the store. We're trying to create an addiction for the customer.”

Fischman denied Mulpuru's statement that Rue La La had generated $200 million in sales and has about 400 employees.

“We've reached 400 people, yes, but I don't know about that $200 million,” he said.

“We're hiring a bunch," added Fischman. "The growth in our associate base is concentrated in three areas: merchants, our technology team and marketing.”

In response to a question from Mulpuru about whether Fischman regretted selling Rue La La to GSI Commerce in 2009 in light of recent lucrative initial public offerings, Fischman said the sale gave investors “tremendous liquidity” during a tough economic time. He added that “plugging into GSI's infrastructure” gave the site a needed advantage.

“When we were sold to GSI, we weren't doing basic e-commerce, mundane things well,” he said. “GSI helped us get up to speed on fulfillment.”

However, Fischman said he didn't correctly prepare for having to answer to investors.

“We wanted to focus on intelligent growth. We don't believe in holding growth back to maximize earnings,” he said. “We are now private again and have a far larger balance sheet than we've ever had before.”

EBay sold Rue La La in March after the company acquired GSI Commerce.

About the possibility that the site could offer universal, social log-in, instead of private membership log-in, Fischman said its current formula has helped to limit shopping-cart abandonment.

“Industry average shopping-cart abandonment is 50% and as high as 70%. On Ruelala.com, abandonment is 12%,” he said. “There's no logging in once you get to checkout. That's because we credential people [when they first get to the site].”

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