While questions remain about whether flash sales can be both a successful business model and an effective marketing strategy, investors seem optimistic. In December 2012 alone, flash sale companies received more than $170 million in funding from investors. It’s no secret why the industry has become so popular—a slow economy created a class of deal-hungry consumers seeking to “win” by snatching up discounts and limited-time offers on high-end goods. Consumers and aspirational shoppers are rewarded with quality products by highly regarded labels, while companies create buzz and excitement around their brands.
But flash sale sites face a number of challenges in the year ahead as competition increases. IBISWorld expects the number of flash sale sites to reach 150 in the next four years, up from around the 90 that currently exist. As the market approaches saturation, consumers feel less urgency—a key emotion for flash sale success—and believe that if they miss this particular sale, there will be similar ones elsewhere. And they may be right. Product suppliers have more choices on who to work with as well as on what terms, and are often spreading their offerings over multiple sites.
Traditional brick-and-mortar retailers are also encroaching. Many are developing and promoting their own flash sale sites or moving to acquire existing ones. These retailers bring instant credibility, supplier relationships, and a built-in customer base that flash sale sites must work hard to develop.
With these obstacles in mind, here are a few ways flash sale sites can best position themselves for success in 2013:
Build customer loyalty. In a crowded marketplace price matters, but customer service can be a game-changer. Focus on exceeding consumer expectations, providing top-tier service, and creating loyalty to maintain relevance and first position in your customer’s inbox.
Focus on exclusivity. The best way for flash sale sites to differentiate themselves is by exclusively offering top products. Flash sites should work to identify hot products and consumer trends early and capitalize on that intelligence by seeking exclusive deals early. Also consider new services like curators (celebrities, designers, influencers) to provide customers with exclusive consulting and advice on products.
Enhance your customer experience. New technologies and capabilities are constantly impacting the industry. Consider changes and updates to make the shopping experience easy, efficient, and fun. Look for opportunities to improve and integrate your operations, shipping, website, and mobile platform to keep your shoppers happy and coming back.
Remember your bread and butter. While it’s important to adapt to maintain a competitive edge, don’t lose sight of what made your company successful in the first place: Deals. Some flash sites have tried to integrate a full-price component into their business model with the assumption that their shoppers would be willing to pay full-price for unique offerings. So far, it hasn’t seen much success, as it appears that getting a great deal on a good product takes precedence over getting a unique or exclusive product at full-price.
Stephen Wyss is a partner in the retail and consumer products practice at BDO USA, LLP.