Flash Sale Websites

FLASH SALES ON THE WEB

Flash sales have been around the retail world for a long time. They are typically 1-3 day sales, where products are priced up to 80% off. Classically they are located in a store or a venue that specializes in flash sales. With the excitement for ecommerce and the recent recession, on-line flash sales have emerged. These sites usually offer a sale for 24 to 36 hours and require their shoppers to be members. They send out notifications of their latest sales via email or social networking sites. Groupon shaped the business model for deal of the day sites, servicing over 500 cities worldwide and worth over $6 billion[1].

The first private sale company that was create was found in 2001 by Jacques-Antoine Granjon. He was a French entrepreneur and created a company called Vente-privee.com, this website hosted private sales of designer brands that ranged from fashion, accessories, home, electronics and wine [2].

In 2004, the site thewoot.com was launched, this site used the same concept as Vente-privee.com but was much more popular. By the end of 2006, over 100 flash sale sites emerged, the industry had exploded. In 2008, Groupon was launched, it became the second fastest company to be valued at $1 billion[3].

Business Model

These websites benefit both the business and the consumer. They benefit the consumer because they allow them to get products or opportunities for cheaper than the actual price, this is important now that the US is experiencing a recession. These websites are very easy to shop on and convenient to use. Flash sale websites benefit the businesses that participate because they get exposure of their products and can reach a large number of customers in a small period of time. After one daily deal, a business's exposure can increase up to 140% in a six month period [4]. After participating in a flash sale, businesses hope to improve long term by gaining repeat customers and marketing in a nontraditional way.

Fashion Flash Sale

Fashion flash sale websites are in the spotlight today, CNN Money made a rank of the "5 leading edge flash sale websites". The first on this list was ideeli.com, this is because it is the fastest growing of all the flash sale websites. When it was first launched in December 2007, Ideeli had tripled its members in less than a year. The second on this list was Gilt Groupe, gilt.com set the standards for fashion flash sale websites. Gilt Groupe was launched in November 2007 and is an invitation only website that sells high end/ luxury goods. It is the first fashion flash sale website to be valued at $1 billion.

Haute Look is the next on this list, launched in December 2007, hautelook.com has over 5 million members in the US and Canada. They were recently bought by Nordstrom, and have over 250 employees. Ruelala.com was launched more recently (2008), currently they have 300 employees and 4 million members. The fifth on this list is MyHabit.com, this website is Amazon's version of a flash sale site. This website was only launched 6 months ago, although it's more luxurious version of Amazon.com. [5]

Travel Flash Sale

There is a huge trend in adding a lifestyle section into these flash sale sites. Last May, Ideeli has partnered with the world's biggest online travel sale site, Voyage Prive.

More than 25 flash sale vacation sites have arose since the recent popularity of Groupon. They work by offering a limited amount of rooms for a few hotels worldwide, this deal usually lasts for about a week and customers usually save 50-60%. They are non-refundable or transferable but are usually much better than the deals offered by Expedia, Orbitz and Travelocity. Although, Expedia offers a daily flash sale for two hotels. Similar to fashion flash sale websites, most travel sites are membership only(membership is free) and cater to more expensive/luxurious hotels. Newly launched sites, such as Overstock's vacations, Trippo and Youpon sell more affordable rooms. Some travel sites, such as TripAlertz are a cross between flash sale sites and Groupon, the more people who book, the lower the price gets. The biggest problem with these websites is that they require advance payment and can't be changed or canceled. They also don't offer airfare, so buyers should always check the price and availability of transportation before booking. Advice when booking on these sites is to read the fine print and compare rates on other sites before buying [6].

Groupon

The most popular flash sale website is Groupon. The name blends the words "group" and "coupon" and was founded by Andrew Mason in 2008. The first deal on Groupon was half off pizzas on the first floor of its building in Chicago. Today, Groupon works with over 150 cities in North America and 100 cities in Europe, Asia and South America and has over 35 million registered users [7]. The website works by offering one "group coupon" a day for each city. The coupon is only available if a certain number of people sign up. If the minimum amount of customers is not met, no one gets the deal or coupon. For example Groupon could sell a $60 haircut for $30. Then Groupon and the company will split the earnings leaving the hairdresser with only $15. Groupon offers a different form of publicity. Unlike traditional forms of advertising, Groupon, doesn't require the business to pay upfront. Groupon refuses to work with controversial businesses such as abortion clinics, shooting ranges and strip clubs [8]. Groupon's customers are mostly female (62% on Groupon and 67% on Living Social are women), therefore the website typically offers deals for health fitness and beauty [9]. Groupon now offers a mobile application that allows its customers to purchase deals then use the screens of their phones as a coupon. They created another application for mobile and tablet users. This application consists of 2 buttons, "I'm hungry" and "I'm bored". This app locates (via GPS) the closest deals for food and entertainment. A problem with Groupon is that sometimes small businesses cannot handle the drastic increase in customers. This runs the risk that there won't be enough products or the customers would be left dissatisfied. It is also difficult for a business to even appear on Groupon because 1 in 8 companies are accepted [7]. A study at Rice University suggests that there are two factors that can make a Groupon promotion profitable in the future. The first is how well the employees are prepared for the promotion.
The second is the likelihood of new customers using the service. The most successful business on Groupon are Spas, 82% of customers who purchase the original deal on Groupon return to the spa again. Although, Restaurants are the least profitable. 42% report that the customers who used a Groupon expected special treatment, did not spend more than the coupon, did not tip and did not return to the restaurant. [9]

Groupon's only serious competitor is Livingsocial.com. This site became popular December 2010, after it received an investment from Amazon of $175 million. Livingsocial is very similar to Groupon because they both have daily deals. Although, living social offers special deals on adventures, such as hikes, hang gliding and kayaking, and deals on escapes, vacations. [10]

Overall, flash sale websites have arose during troubled times and furthered the growth and development of ecommerce. They offer a more simplified and cheaper way to shop. These websites make opportunities affordable and available, therefore making them very popular and valuable.

[1] Kincaid, Jason (2011 [last update]). "Confirmed: The Groupon/Google Deal Is Off". techcrunch.com. Retrieved November 10, 2011.

[2] Blodget, Henry. " Flash-Sale Leader Gilt Groupe Raising $80-$100 Million At A ~$1 Billion Valuation" . Business Insider, February 21, 2011 retrieved October 2, 2011

[3] Steiner, Christopher. “Meet The Fastest Growing Company Ever”, Forbes Magazine, August 30, 2010, retrieved October 1, 2011

[4] Dholakia, Utpal M.; Tsabar, Gur (1 May 2011). "A Startup’s Experience with Running a Groupon Promotion". Social Science Research Network, Working Paper Series. Retrieved November 10,2011.

[5] Khalid, Kiran. "5 Leading-edge Flash Sale Sites." CNNMoney - Business, Financial and Personal Finance News. CNN Money, 27 May 2011. Web. 15 Nov. 2011. .

[6] Bly, Laura. "USATODAY.com." Travel News & Guide: USA TODAY Travel Network - USATODAY.com. USA Today, 29 Apr. 2011. Web. 20 Nov. 2011. .

[7] Weiss, Bari. "The Weekend Interview with Andrew Mason: Groupon's $6 Billion Gambler - WSJ.com." Business News & Financial News - The Wall Street Journal - Wsj.com. The Wall Street Journal, 20 Dec. 2010. Web. 20 Nov. 2011. .

[8] Williams, Geoff. "Groupon's Andrew Mason: The Unlikely Dealmaker - AOL Small Business." Small Business - News, Advice and Ideas at AOL Small Business - AOL Small Business. AOL Small Business, 9 Aug. 2010. Web. 21 Nov. 2011. .

[9] Dunham, Jamie. "Marketing to Women: Groupon or Groupoff? 10 Facts You Need To Know « The Lipstick Economy." The Lipstick Economy. Wordpress, 8 Oct. 2010. Web. 21 Nov. 2011. .

[10] Dugan, Lauren. "LivingSocial Brings Urban Adventures to Its 10 Million Members - SocialTimes.com." SocialTimes.com - Your Social Media Source. 9 Oct. 2010. Web. 21 Nov. 2011. .