Just before Thanksgiving 2007, a new luxury retailer opened its virtual doors. Called Ideeli, the site would offer designer clothing and accessories at deep discounts, like the already successful Overstock.com. But Ideeli would take its offers directly to the email inboxes of women interested in such deals, adding a touch of high-end exclusivity by having them “join” the service by invitation only. What’s more, the deals—often on limited inventories of closeout goods—would be available only for a matter of hours, or until the items sold out. “We’re careful to maintain a sense of scarcity,” Ideeli CEO Paul Hurley told The New York Times at launch. “There’s a whole sort of ‘game’ aspect to it.”
Less than six years later, Ideeli is going strong in spite of the lingering economic recession; in 2011, it posted more than $77 million in revenues, and Inc. named it the fastest-growing business in America. It is not alone in experiencing success with the “flash sale” concept—countless retail sites including Fab, Gilt, JackThreads, MyHabit, Plndr, and RueLaLa have sprung up to offer exclusive discount deals on everything from socks to South Seas getaways to their self-selected members.
The membership aspect of a “private” sale offers a unique advantage over other strategies to product marketers and potential buyers alike. “[Consumers] are receiving offers for products they are already interested in buying,” says Fern Lee, CEO of THOR Associates, a DR marketing consultancy based in New York City. “Flash-sale websites offer highly discounted items that consumers perceive to be very valuable. It is a win-win for the consumer and the marketer.”
Divide and Conquer
Abandoning the invite-only strategy, flash-sale sites have grown exponentially, and now maintain huge lists of customers who opted in after clicking on a banner ad or seeing a friend boast about a great deal on their Facebook timeline. Fab, which concentrates on modern design across all categories of goods, broadcast its “Smile, You’re Designed To” sale alerts to more than 10 million active users as of December 2012 after little more than a year in business; luxury-goods specialist Gilt Groupe claims more than 6 million.
Flash-sale sites typically serve a specific niche, says Jan Carroza, president of Dawn Pilot, a firm specializing in DR and new-media forecasting based in Port Hadlock, Wash. “For designers, it’s a way to offer sample sales,” she says. “For companies like Zulily.com, it’s a place for moms to shop for their kids and themselves. They reward their members with new offerings [and] discounts, and for referrals. It’s a loyalty play.”
They also offer ample opportunity to “share” news of one’s good fortune online via Facebook, Twitter, and other social media outlets, attracting like-minded shoppers with similar tastes. “The demographics are so specific [that] the sophisticated social marketer can target its demographic, much like a DRTV marketer does by looking at the viewership for network programming,” Lee says. “Like DRTV media buys, they are also able to target geographically—nationally, regionally, or locally. Much like DRTV, there are specific ROI metrics showing social conversions.”
To meet demand and drive sales while maintaining a “curated” focus, flash-sale sites have launched new departments, sub-brands, and alerts, dividing and specializing like stem cells. This metathesis—and the resulting proliferation of sanctioned alerts—might be the undoing of other retail channels, but by limiting inventory and reiterating the notion of a private sale (no matter how public), many of the sites are turning sample sales, liquidations, and otherwise boutique-level retail activity into big bucks.
Insurgents of Urgency
DRTV is recognized for creating an “Act Now” urgency in its spots and infomercials, whether or not supplies are actually limited or the offer is available for only a limited time. But flash-sale sites go a step beyond infomercials and home shopping channels in creating true urgency: Sales launch throughout the day, they run for as little as 24 hours, and sellouts are common. “Capturing urgency comes down to a compelling offer with a highly perceived value,” Carroza says.
“While DRTV tries to give the impression that the deal will only last a short while, I think today’s audience knows better,” she continues. “To address just a narrow selection of closeout items, the DRTV marketer would have to educate the audience about the truly limited number of pieces to avoid disappointment and damage to their brand. The DRTV consumer would be very unhappy to find a product just advertised as being sold out with a note to be wait-listed.”
People frequenting flash sales, however, are so familiar with the thrill of the hunt that they are prepared for a sellout. Many flash-sale sites wait-list items, gauging interest for a restock and often, in effect, pre-ordering on the customer’s behalf. But high-ticket, one-of-a-kind items—like the occasional offerings of vintage Eames furniture on Fab or antique watches on Gilt—may never reappear. The levels of specialization and prohibitive price points make such sales difficult to reproduce on television.