How Do Flash Sales Work?

Flash sales have become extremely popular these days. There are several websites which are dedicated to providing flash sale opportunities to their customers. Rue La La would be a great example of such a website. It exclusively sells products on flash sales and has a turnover of over $100 million.

On the other hand, there are some websites where there are intermittent flash sales. Some companies have adopted flash sales as the only method to sell their merchandise. A remarkable case of this is the company Xiaomi. This Chinese corporation is the largest seller of smartphones in India. However, these smartphones are not sold via shops or even online sales.

The company opens a short window of a few minutes every week to sell these products. This company is clocking revenue worth over a billion dollars and is only following the flash sale method to generate sales.

It would, therefore, be appropriate to say that flash sales have become very important in the marketing world. Yet, very few people know how a flash sale works and what goes on behind the scenes. In this article, we will have a closer look at what flash sales are.

What is a Flash Sale?

Flash sales are meant to sell products at deep discounts. In many cases, the product may be sold at their retail price. However, due to the high demand that these products face, they may be using the flash sale route to distribute the product to customers. However, the bottom line is that customers expect superior value from a flash sale. If there is no “special” offer on a product, people are not going to waste their time queuing up online to buy it.

It needs to be understood that flash sales are by no means a modern invention. Many brick and mortar stores have been using this model to sell slow moving stock. Flash sale websites are just aggregating the process and making it easier for the retailers.

For instance, earlier ten different retailers had to hold ten different sales. There were promotional costs involved and also this led to the dilution of the brand image. Flash sale websites, on the other hand, buy products from all the retailers at an even more discounted price. They then sell it to customers for a profit. This saves each store the trouble of organizing its own sale.

How Do Flash Sale Websites Operate?

  • Targeted Customer Base: Unlike retailers, flash sale websites do not have fixed products to sell. Instead, they are willing to sell whatever their customers are willing to buy.

    The first step in building a flash sale website is to have the database of a large number of customers. This database can be created by first selling few deeply discounted products at a loss. Once this database is created, the website can mail across the latest offers to these customers.

    A large customer database means more people will be informed about the offers. This means that more people are likely to buy and that the stock will be sold off at a faster rate.

  • Choosing The Product Mix: The next step in managing a flash sale website is to create a product mix that appeals to the target audience.

    For instance, if the target audience consists of many expectant mothers, then goods such as maternity clothing and kid’s apparel should be regularly offered for sale. If the product mix is not relevant, then the customer base will slowly lose interest in the website. This will mean lower sales turnover in the future and the eventual failure of the website.

  • Hype: Flash sales happen for a very short duration of time. This means that the products in these sales are sold within seconds. Many times, customers are not able to get these products even after several attempts. This creates an artificial scarcity. Scarcity creates hype.

    People start believing that the product must be of good quality and that is the reason that it is getting sold off so fast. This hype helps the company clock more sales than it would have done otherwise. This is the reason why flash sales are now preferred by several organizations

Challenges Facing Flash Sale Websites

  • Firstly, the competition that these retailers are facing is intense. There are many flash sale websites and each has to compete with the other to get business.

    In the process, they have ended up dropping the prices so low that it is no longer profitable for them to conduct business.

    This is the reason why many flash sale based websites which were earlier valued at over $1 billion were finally sold off for less than $100 million. Several of these firms have been laying off their employees too. Hence apart from a handful of successful firms, the other flash sale websites face several challenges and a grim future.

  • Lastly, the retail world in the United States and across the world is being dominated by Amazon.

    Flash sale websites are too small and do not have the capital required to compete with this global behemoth. This is the reason why many of them are struggling to survive<

To sum it up, flash sale websites had a promising business model. However, they are also facing a lot of challenges.

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