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In defence of flash sales

Black_Friday

Tom Valentine stands up against the buzz-phrases and speaks up for good old-fashioned flash sales

Those of us that work in or near e-commerce have a bit of a habit of reducing what will and won’t work in our business to bumper stickers.

We’ll hear that ‘Mobile is the Future!’, or ‘Paid Traffic is Stupid!’ – swiftly followed by ‘Paid Traffic is Fine…if it’s On Mobile!

Myth-busting

Having co-founded Secret Escapes three years ago, I’ve come to the conclusion that when leading a young business these sorts of slogans are somewhere between useless and dangerous.

These sorts of slogans are somewhere between useless and dangerous

The truth is always far more nuanced and what works for one business, in one vertical, may be an absolute catastrophe for another.

So with this spirit of myth-busting in mind, let’s consider another, increasingly common statement: “Flash Sales Are Dead”.

Alive and kicking

Flash sales – time-limited sales that use significant discounts on retail price to drive purchases that wouldn’t happen at full price – have been a vital part of the commerce marketing mix since, well, let’s just say long before the dawn of the internet.

Retailers use them to manage the price elasticity of customers, clear unsold lines and balance margin and sales volume. A glance at Amazon‘s homepage or a department store window after Christmas should be enough to convince anyone that flash sales aren’t going anywhere fast.

All of which leads me to suspect that what people really mean when they say “Flash Sales Are Dead” is that “Flash Sales Businesses are Dead”.

Froth and hype

groupon

There’s no denying that froth and hype around businesses whose primary offering to customers is flash sales, is dying down.

Groupon, once a prime case-study in the nearest we had to a Holy text – The Lean Start-up – is currently taking a regular beating. And Fab has just announced it’s moving towards a model focusing on full price goods.

However, I’m convinced businesses that curate both the supply and the customer, while using permission marketing to drive traffic to real deals, can and do scale sustainably.

So the question then becomes: why do some flash sales sites grow into enormous businesses, like Vente Priveewhile others don’t?

Five-minute wonders

I believe that two things need to be in place to grow a scalable flash sales business.

The first is supply in a vertical that can scale with you, and won’t evaporate when circumstances change.

Many flash sales sites have a great first year, as they find pockets of stock that fly off the shelves, but run out of growth as their initial supply sources fail to grow with them. This has been a particular problem in fashion and home-wares in the last couple of years.

When the economy was at its lowest, there were warehouses full of unsold stock, ripe for flash sales. But as the economy has improved and production volumes have been decreased, many flash sales sites have simply run out of stock.

One way to avoid this risk is to focus on a vertical that’s less prone to fluctuations in stock.

In our case, the hotel market structurally tends to have unsold allocation suitable for flash sales to discretionary travellers. But the argument holds for other markets where stock that’s unsold loses all of its value – think tickets (YPlan) or restaurants (BookATable)

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Spreading the word

The second golden rule is to have a group of customers, who are actually keen to receive regular marketing communications about your chosen market.

It’s all well and good having great supply, but unless you can tell people about it you’re in trouble, and to do that you need a community that identifies with your market.

It’s unlikely that members of a flash sale site will buy every day, so the emails and notifications you send need to be interesting, even when a member isn’t about to buy.

It’s much easier to market flash sales to interest groups that already exist, such as travel, fashion (Gilt.com), mums and babies (Zulily) and sports (SportPursuit), than to try and create an interest group from scratch.

Still in the game

If you’ve got these in place, the game’s yours to lose. If you haven’t – you’re toast.

At its simplest, a flash sales business delights its customers by offering them deals on the things they love and wouldn’t otherwise have been able to afford – which is why I’m betting that reports of its demise have been greatly exaggerated.


Tom Valentine is a co-founder and managing director of Secret Escapes

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