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

 

The Top 7 Most Important Factors in Building (Better) Ecommerce Companies

eCommerce has really picked up pace in the last ten years and is on its way to becoming a really serious competitor to classic retail. Needless to say, many companies jump the ecommerce wagon. Some are internet savvy, some are retailers with many years of experience or, in the most fortunate case, both. However, that most fortunate case is usually rare. The internet and the classic commerce are still, for most of us, worlds apart.

ClickNow

The main reason ecommerce is still a pretty damn hard thing to do is it takes a lot of know-how regarding both commerce and the internet. When starting or expanding an ecommerce operation you will be faced with decision regarding management and sales platform, marketing (“do I do Social Media, should I go for Search Marketing or maybe Affiliate marketing?”) but also more real-world issues such as “What are the products I will be selling?”, “How do I store these products?” or “How is my product going to reach my client?”.

While there are many, many variables and data you will be faced with, you still need to keep an overview on the most important factors that will make your ecommerce business successful or not. Here are the most important 7:

  1. Choice of Products and Product Display
  2. Stocks availability
  3. Pricing
  4. Shipping
  5. Customer Care
  6. Search (yes, search)
  7. Innovation

As you notice I have not mentioned marketing. Marketing makes a difference when all those above are working well together. That is not to say marketing is not important. It is. Unfortunately marketing cannot save you when your store isn’t performing its base functions.

[See how these factors connect to create Omnichannel Retail]

Further on, keep in mind that as an eCommerce company you are first and foremost a technology company. If you are a classic retailer this part will be the hardest thing to wrap your head around. You use technology to deliver products at the best price and with the best customer care possible. As such you need to stay constantly focused on market changes (your product market) and technology changes (think how important search engines are for online-first businesses) and adapt those changes to your 7 pillars of ecommerce excellence, as follows:

1. Choosing the Product Range and Product Display

What makes Amazon such a great business? One might argue things like “Wide variety of products”, “Great prices”, “Fast delivery” or “Great customer experience”. All these, and probably more, are true. All these make Amazon the leader in US’ largest online retailers but I would like you to focus on the following screen:

Amazon tracks, stores, analyzes and than recommends based on that recommendation products you are likely to buy.
Amazon tracks, stores, analyzes and than recommends based on that recommendation products you are likely to buy.

What you see there is my recent history on Amazon (I am quite fond of eCommerce, as you’ve probably noticed). Now if you would be Amazon you could basically market anything to anyone (well, almost anything to almost anyone). Why? You can show your customer a version of your product choice based on his or her particular interest,  particular history of browsing and buying.

So with Amazon basically each customer gets his or her own version of the store. 

But you are not Amazon. You don’t have the same product choice, the same data, the same infrastructure. You will need to create a specific product choice and focus on your specific niche.

Ex.: Say customer X wants to buy a computer. Where would he go? Probably to an IT related online store. Say he needs to buy a mouse after he bought the computer. He would, if the first shopping experience was good, go to the same place and make an additional purchase.

If you are not Amazon you will need to make a clear choice regarding your product range. You cannot be a fashion retailer and also deliver groceries. It just doesn’t makes sense. It doesn’t make sense business wise and it doesn’t make any sense for your customer.

After you have chosen your product range you will need to expand it. Say you started by selling clothes. There are a few product categories that would go great with that type of products:

  • shoes
  • accessories
  • bags

Once you got that settled you will notice that there are specific ways you will need to display your product. As a fashion retailer you will need models and show your customers how those clothes would look on them. Such a choice of display won’t make too much sense if you would be selling, say, laptops. No one actually cares how they look when typing, unless they own a Mac and they are typing in a Starbucks.

2. Stocks Availability

Picture this: you are shopping in your favorite brick and mortar store. You’ve just tried on a couple of jackets and you’ve found that one, great looking, discounted, jacket. You have it in your hands. You have the money. You head over to the cash register and take out your credit card. Surprisingly, even though you’ve spent the last 20 minutes searching for it, trying it on and then deciding to purchase it, the item is not actually in stock.

That is not very nice, isn’t it?

Customers feel tricked when they try to purchase something that is not actually in stock. That usually happens when your warehouse stocks system aren’t synced with your ecommerce site. It’s really frustrating and you need to make sure that never happens to your customers.

Key take away: Keep your stocks updated real time.

3.Pricing

Pricing – how do you do it? Do you just go ahead for the smallest price possible? Should you rather adjust your price according to the market and the other competitors?

Pricing should take you in the shortest time to a profitable operation. The pricing operation is mostly an internal decision (the price should first depend on your OWN resources and costs) while still trying to keep up with the market. Here are several things you should consider while looking at your pricing options:

  • You will probably not turn a profit from the start. As such – focus on creating a competitive price that will, at some point help you turn profitable.
  • DO NOT go for the lowest price on the market. Try to earn customers by offering discounts, vouchers, having a great customer care and a great product range. Anything but the lowest price. That is always an unsuccessful choice. Of course – you will get a couple of customers but these are not really the customers you are looking for. Plus a low price usually means a very low profit or loss. It’s better to have a slow but steady increase in customer base than a fast increase that will, in time, bankrupt your business.
  • Keep in mind the operational costs. While most startups focus on technology and marketing costs, they usually overlook many operational costs such as staff, warehousing, shipment and others.
  • Think highest possible price instead lowest possible price. Keep in mind that you are not your marketing. While you may want to be seen as a low pricing company you need to maximize your profit. Find the best balance between profit and managing to stay competitive in the market.

4. Shipping

Here's a box from ASOS. It's branded, easy to use and it usually carries things people love.
Here’s a box from ASOS. It’s branded, easy to use and it usually carries things people love.

Shipping is an important part in your business. Doh! It is, for best or for worse – the most important physical contact your customer has with your company, unless you also have brick-and-mortar stores. You should make the best of it.

Here are some ways of making a great impression with shipment:

  • Treat the delivery box as the most important part of your visual and physical identity. Because it is. Have a look in the right hand area at this ASOS box. It has a clean, functional design, it’s beautiful and people love receiving it. The experience is close to receiving a gift, as most have already paid for their purchases. Don’t spoil the experience.
  • One size shipping DOES NOT fit all. Adjust your shipping model to your market. If you are delivering groceries people will expect them as soon as possible (usually within 24 hrs) and are willing to pay to get this. If you are a discount shop people are willing to wait a little bit longer as long as they know they get a better deal.
  • If possible – offer free returns. It’s great when trying to build trust. People will think the pros and cons of buying from your web store and a free return is a great incentive.

5.  Customer care

This is one of the most important pieces of building a strong, reliable eCommerce brand and, unfortunately, one of the hardest to manage.

Zappos has turned great customer service from a cost to a competitive advantage
Zappos has turned great customer service from a cost to a competitive advantage

While CRM (customer relationship management) systems and technologies have improved greatly, most of what your customers would call customer care still relies on people answering calls, people delivering merchandise, people in charge of packaging. People, people, people. Customer care is about bringing the right kind of people on board, making sure they understand what makes your company great and making sure they always do their best in handling customer needs.

It’s a hard thing to build. Good customer care is subjective. However, there are a couple of things you can do to improve your chances at keeping your customers happy and returning:

  • Build a culture around your customers. Make sure that anyone involved in your ecommerce operation knows how important it is to keep customers happy. After all, it’s not like jobs depend on it. Oh, wait. They do.
  • Make sure you track your customers purchase history and make this purchase history as clear as possible to your call center operators. You won’t be able to attain a perfect score. Just don’t ruin your best customers’ experience.
  • Don’t judge your customers. There are no “dumb questions”. There are no calls that take too long. After all, if Zappos can handle a 9 hours and 37 minutes phone call, you can spend a few extra minutes with those who buy your products.

In the end customer care is actually treating your customers friendly, polite and helpful. If you can manage that , you will build a great shopping experience.

6. Search

Amazon's search engine, A9.
Amazon’s search engine, A9.

While it could be a little awkward to add search, basically an ubiquitous and often overlooked eCommerce feature, it actually is one of the most important tools in helping your customer reach its desired product as fast as possible, without hassle.

How many items are listed on Amazon? Millions. There are so many products that Amazon decided that it didn’t need just a search engine “feature”, but a search engine program. At launch A9, Amazon’s Search platform,  was rumored to be a competitor to Google but it turns out Amazon just wants to guide its customers as efficient as possible to the products they are looking for.

Don’t underestimate the importance of search. We live in a search-engine era where we need to find what we are looking for in matters of seconds. If your search feature doesn’t do that, maybe its time to work a little bit more on that.

7. Innovation

kindle dx
The Kindle DX

Remember: as an eCommerce company, you are a technology company. I will say it again. You are a technology company. Get used to it. Now – as any technology company, you need not only keep up with market developments such as mobile commerce or social commerce, you need to lead the way.

The largest eCommerce companies lead by innovation. Weather it is Amazon’s Kindle, Ebay’s Market Place or even AliBaba.com’s online payment system, Alipay – they all innovated their way to the top and continue to develop to stay there.

Conclusion

These are the top 7 most important factors that make or brake eCommerce companies. Focus and improve each one of them but remember that commerce has always been about a) delivering products, b) at a great price, c) before and better than anyone else. It still is. We’ve just added a layer of technology on top of it.

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?