How big are Flash Sales Sites? An Infographic.

We had a look at how flash sales sites work and got into some details regarding their business model.

So, just to get a better understanding at their size and growth rate, I’ve prepared an infographic which I hope you’ll enjoy:

Flash sales sites stats as infographic
Flash sales sites stats as infographic

If you like the information, be sure to visit our sources here and here.

What are Flash Sales Sites and How do They Work?

Visits to Flash Sales Sites have doubled 2011 to 2012. Source: Time.com
Visits to Flash Sales Sites have doubled 2011 to 2012. Source: Time.com

Unless you’ve been living under a rock for the past 5 years you’ve probably heard about a little thing called flash sales sites. Well … maybe not so little. It seems that, according to Gilt founder and ex-CEO Kevin Ryan, the flash sales sites you’ve probably heard about, such as Gilt, Fab and Rue La La have been doing great with turnovers between $100 million and $1,69 billion.

These are all new fresh companies so how come have they managed to grow so fast? How do they work? What is the business model and who are the most prominent players on the market?

Let’s start with number one:

What are flash sales sites?

By now you may have pretty clear idea that flash sales mean generously discounted merchandise. It may be fashion, home products, electronics or others. Customers expect flash sales sites to deliver well .. cheap(er) products.

The whole idea is by no means new. Brick and mortar stores used to and still do it from time to time (usually seasonally) in order to unload overstocks. At some point someone realized that there is a business opportunity there:

Say you have a dozen retailers each having 10 products that went unsold in the previous seasons and they want to get rid of all these stocks. They can either deal with all the hassle of organizing a sales operation to unload extra stocks or someone can just buy the whole merchandise, at an even lower cost and then resell it and turn a profit.

At first companies buying these products didn’t need to sell it at a discounted value. They would just buy the whole unsold stocks and try to sell it (they were usually successful) on a different market. Example: buy discounted merchandise in the US and sell it in Eastern Europe where last year’s collection is not only “good enough” but “great”.

[Read more how retailers connect channels with Omnichannel Retail]

In time the whole “moving to a different market” operation proved to be a little too complicated, with global recession, countries getting a little more protective with their own economy and so on. So a new business model came up:

How do flash sales sites work?

Flash sales develop a large targeted potential buyers database, test these potential buyers to see which is the right product mix and then buy unsold inventory and resell it at a large discount. Sometimes – they don’t even do that. They just attract potential customers to several discount offers which become active when a certain number of buyers is reached. They ensure this way that they are able to purchase the merchandise without reporting losses.

The logistics in this business is a little tricky if you are dealing with “volatile” stocks and can sometimes turn to frustration from customers as orders sometime take weeks to arrive.

Increase in customer lifetime value.
Increase in customer lifetime value.

However, when purchases are made, flash sales sites customers are more likely to buy again, according to this study. Customer lifetime value increases 385% for flash sales sites, whereas traditional online retail shows an increase of “only” 94%.

So – business is a-booming. Buyers flock around flash sales sites, they buy more than on traditional online stores and the business model seems to be more stable than Gorupon’s.

Who are the champions and who are the contenders? Let’s start with number 5:

Which are the top largest flash sales sites?

5. Fab.com

Although Fab is moving to a no-flash-sales model, the company still features some of the sales that made them famous.
Although Fab is moving to a no-flash-sales model, the company still features some of the sales that made them famous.

4. Ruelala.com

Ruelala.com
Ruelala.com

Ruelala had a dashing growth in the previous years but few know it is part of GSI Commerce, which in turn is a subsidiary of eBay so yeah, Ruelala is part of eBay.

3. OneKingsLane.com

One Kings Lane was launched in 2009 by female entrepreneurs Susan Feldman and Alison Pincus
One Kings Lane was launched in 2009 by female entrepreneurs Susan Feldman and Alison Pincus

One Kings Lane.com is a place where customers can get a great curated product mix for home. The revenue was roughly $200 million in 2012.

2. Gilt.com

Gilt, although not turning a profit is approaching the $1 billion turnover threshold fast.
Gilt, although not turning a profit is approaching the $1 billion turnover threshold fast.

1. Vente-Privee.com

Largest and one of the oldest flash sales sites - Vente-Privee, unlike its crappy URL is actually awesome with its 2013 Euro 1.3 Billion Turnover.
Largest and one of the oldest flash sales sites – Vente-Privee, unlike its crappy URL is actually awesome with its 2013 Euro 1.3 Billion Turnover.

The award for the largest flash sales site goes to Vente-Privee, which has had a 40% increase in flash sales in 2012. Their sales went up to € 1.3 billion (aprox. $1.69 billion). They’re living large. So large that in order to celebrate this great feat they bought a theater. No, really.

How big are flash sales?

Now, if you’ve find flash sales interesting, you might head over to this link right here, where you can have a look at an infographic showing more information on the subject at hand.

flash-sales-pic

 

5 Reasons Customers Will Shop Online (Other than Price)

When it comes to online retail conventional wisdom states that customers will choose the virtual over brick-and-mortar store mainly because of the price. While this may be true , it’s only partially true. Price is a big factor and probably the most rational factor when it comes to shopping online. However, choosing online shopping takes more than the rational.

why people buy online graph
According to this PWC study, while still being important, price is not the only factor favoring the decision to purchase online

Above you can see a chart on a recent study by PWC, that shows some of the reasons driving customers to shop online. Lower prices and better offers is the second most important reason people will buy online followed by the speed factor and things like better variety and better product information.

[See more about what customers expect from Omnichannel Retail]

So – if you are managing, owning or part of an online retail operation, you should know your customers motivations.

Here are the top 5 reasons, other than price, that drive people to buy online:

1. Shopping online is convenient for anyone, anytime.

The usual trouble with business hours is that they are the same for pretty much everyone. Both shoppers and retailers. While movies portrait people as care-free, on-the-go individuals, the reality is that much of the time people are either stuck in an office, stuck in traffic or just at home, spending time with the family. Say customer X remembers he needs to buy a new pair of shoes at 2 PM, while still at work. Will it be possible for him to drive to the closest store? Will he just go online and buy his favorite pair of shoes, from a wide selection of brands and offers. Of course it’s the latter which brings us to …

2. Shopping online is easier and less stressing

Think about shopping centers. Picture the people, the crowd, the options. Hear the noise. Now think about looking for a parking space, walking to the mall, walking some more from store to store. Trying on. Maybe going home empty handed.

Now picture doing all that in front of the computer, listening to your favorite music, comparing the best deals, without anyone trying to convince you what is the perfect fit. Shopping online is just easier. Customers choose it because it’s stress-free, it’s rational and you can get the best deal without spending a whole afternoon looking for a pair of pants.

3. Shopping for products unavailable in the near area

Not longer than 10 years ago, most shoppers would have had to choose between the products available in the nearest store or not buy anything at all. There was no “shopping for that special bottle of wine I saw last year in Paris”. If the local wine store was not selling it, well … it simply wasn’t worth the hassle to look for it anymore. Now consumers can just “google” a particular brand or product and someone, somewhere, will be ready to sell it and ship it.

4. It’s easier to compare offers

To be fair, this one has a lot to do with price but than again comparison and especially easy comparison is a matter of convenience rather than pricing. Comparing prices online is way easier than any of the options offline stores have.

5. It’s just so much better to talk about

Remember the last time you talked about visiting a store while chatting with your best friend? Probably a long time ago. Truth is conventional retail stores are just so … available to anyone. Uninteresting. Common. You cannot brag about a new, indie, never before heard store that still offers a lot of products. Shopping online is just much more conversation-worthy.

Conclusion: if you are selling online – please don’t focus solely on price. It is so yesterday.

Bridging the gap in multichannel shopping

Online retail is the wonder kid of retail – it is young, energetic, it is growing fast yet it is still in its infancy. Based on 2010 estimates online retail amounted for no more than 7% of total retail purchases, as seen below.

Evolution of online rtail share
Evolution of online retail share

The figure may not be exact as it amounts for purchases that happen exclusively online. Users tend to mix retail channels in their quest for a better shopping experience. They might know the brick-and-mortar store brand and order online because it is more convenient. They might also discover the online store, find the product best suited and than “feel” it in the physical store.

Multichannel tracking has not changed that much since the days consumers would receive coupons in magazines and advertisers would track these coupons to get a better view on what’s efficient and what is not in their marketing efforts.

What is Multichannel Shopping?

First and foremost – what is Multichannel Shopping? As you probably have noticed or done so yourself, shoppers tend to use multiple ways of combining online and offline activities. Here are the most important:

  1. Shopping across multiple channels (brick-and-mortar stores, online shops, mobile apps, phone order etc.). Consumers will try to use the best channel available at the time. Say you are a avid online shopper but this evening your brother celebrates his anniversary and you forgot to buy him a present. You will rush over to the closest store and buy something from there, after you have searched for that store and the gift online.
  2. Using more channels to purchase goods from a single retailer. Users that are accustomed to a certain brand will try to buy as often as possible from that particular brand. They will mix offline and online purchases, depending on the specific occasion, while staying loyal that brand.
  3. Using multiple channels to complete a purchase. Users will use multiple channels sometimes, to get the best deal / the easiest way to get the goods. They might browse the online store, order the product on the phone and purchase / pay for it in the brick and mortar store.

How can we track Multichannel Shoppers?

As retailers increasingly look for new ways of tracking consumers and increasing sales they use a combination of old(er) and new(er) strategies, such as:

  1. Multichannel loyalty programs – this programs are usually extended CRM programs, using identifiers such as member cards, phone numbers, unique ID’s or others. Consumers are encouraged through loyalty points incentives to use their ID’s on the different channels
  2. Multichannel consumer life cycle – tracking the consumer through different channels by combining online and offline purchase steps (Ex.:buy online, pay offline, support on the phone)
  3. Track users through wi-fi and mobile use – a rather cutting edge yet extremely promising strategy of trading free on-location internet (everybody wants some), combining it with personal online data (such as Facebook user accounts) and seeking trends in collected data, in order to increase sales and understand the consumer life-cycle better.

What is your take on multichannel shopping?