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Retailers focus on flash sales as mobile changes how consumers shop

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February 27, 2013

With flash sales sites such as Gilt Groupe and Rue La La posting significant growth during the recent holiday season – driven in large part by mobile users – other retailers are looking to get in on the action with their own flash sales offerings.

Several ecommerce Web sites who focused on limited-time sales, also known as flash sales, saw revenue jump as much as 50 percent during the 2012 holiday shopping season and reported similar jumps in mobile traffic and sales. The success of flash sites suggests it is becoming a mainstream retailing concept.

“We see the trend continuing,” said Bob Egner, vice president of product management and global marketing at EPiServer US, Chicago.

“There is a segment of the market that is always going to do that,” he said. “The technique will continue to be used in more innovative ways in the upcoming shopping season.

“Mobile becomes a really critical part for unlocking the power of flash sales because it usually people who are always connected,” he said. “People who are in their normal life are getting interrupted by some message that is coming to them on a mobile device, usually a smartphone, and they are making a quick evaluation and purchasing based on impulse.”

Retailers take notice
While flash sales sites saw significant growth during the holiday shopping period, overall ecommerce sales grew just 14 percent during the same period.

Seeing a new opportunity to reach impulse buyers more retailers are looking to incorporate flash sales into their offerings.

For example, Wayfair, a home décor ecommerce retailer, recently launched a flash sales site, Daily Fair. The flash sales site includes up to seven new sales per day, each lasting for 72 hours, with shoppers receiving an email at noon announcing the daily sales.

Impulse purchases
One reason why retailers are gravitating toward flash sales is the ability to attract the impulse buyer.

“Flash sales capitalize on the buyers’ perception  of urgency for a great deal,” Mr. Egner said. “This could either be a price related, or a unique product in limited quantity – since the offer is time limited, it forces the transaction forward.

“Flash sales tend to be well suited for the connected consumer who can spot the deal and act on it immediately without having to get to their computer,” he said. “We heard numerous anecdotes from this past holiday shopping season about double digit percent increases in sales.

“In fact, retailers that we talk to tell us they are placing more attention on this type of impulse buyer because it’s a segment that Amazon doesn’t address.”

Additional benefits of flash sales include that they are effective at capturing consumers’ attention, driving them to a Web site and, hopefully, encouraging them to purchase full-price, as well as flash sale items.

Long-term questions
Despite the strong sales posted by flash sales sites, many have questioned the long-term potential of this retail concept. One potential issue for flash sales sites is the low margins inherent in this model.

Additionally, brands typically have a love-hate relationship with the idea of discounting. Some could eventually decide that flash sales sites dilute their brand image and stop making inventory available to these sites.

As the space gets more crowded, it is also unclear just how big an appetite consumers have for limited-time sales.

Many times, retailers jump into flash sales too quickly without the proper preparation, including having the right amount of inventory on hand.

Still, when done well, flash sales have the potential to generate significant revenue for retailers.

“Data from IBISWorld and comScore suggest flash sales are about 1 percent of 2012 retail e-commerce sales, but out of $186B total sales, that’s a lot of spending,” Mr. Egner said. “Forrester backed this up in a recent webinar we ran with them – Postmortem: 2012 Online Holiday Shopping Season – that their data shows mobile devices just do better for flash sales than traditional computers.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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