During the recent economic downturn, flash sales emerged as the latest retail rage for fashion-driven and deal seeking online shoppers. The business model was brilliant: Retailers could unload discounted merchandise under the premise of designer exclusivity. Hoping to trigger an impulse purchase, the flash sales model hinged on making those exclusive items only available for a limited period of time. Spending on flash sales rose 21% last year, according to American Express Business Insights, which tracks the spending habits of its 90 million cardholders. Many consumers succumb to the impulse buy as they race the clock, but after a few times, shoppers realize that they could buy the same item for less and at their leisure on other websites like Amazon that are building their luxury goods offering.
Gilt Groupe and Rue La La, two prominent flash sale websites, act as a safety net for designers who can count on selling their stock for flash sale purposes. But this is changing. According to Jill Puleri, U.S. consumer spending is on the rise and luxury brands are doing very well, which minimizes the need for designers to participate in flash sales.
With the improving economy, more retailers are vying for the affection of fashionistas who are interested in the same merchandise. With stiff competition including other flash sale sites, prominent sale events at department stores, outlet stores such as J.Crew or Banana Republic and off-price retailers like TJ Maxx, flash sale retailers are struggling to stand apart from the crowd. As more players enter the daily deal and flash sale space, consumers today are often overwhelmed with offers, creating a sense of email fatigue.
According to CNN and the latest data from comScore, traffic to Gilt.com has fallen 9% since the start of 2012, even though the site has shown growth in the past few years. CNBC reports that Rue La La’s percentage of unique visitors has decreased 29% in the last year. In 2011 alone, 100 smaller daily deal sites shut down, excluding those that were acquired by the larger websites. Could this be the downward spiral for the flash sale hype?
Realizing that consumers are inundated with similar deals, flash sale retailers are beginning to target niches. For example, Gilt Groupe, which has managed to navigate consumer fatigue by emerging as the front-runner in the flash sale space, has expanded its portfolio to include Gilt Men, Gilt Children, Gilt Home, Gilt City, Gilt Taste and Jetsetter. CEO of Gilt Groupe, Susan Lyne, reports that their menswear revenue has tripled since their expansion.
Despite the challenges and redevelopment that lie in the future, it is clear that flash sales are continuing to expand their reach. The next stages of development will test these websites’ ability to float in our fast paced and ever changing society.