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Do Flash Sales Help Online Retailers?

Online retailers looking to generate buzz about their products while gaining exposure for their websites may choose to employ a marketing strategy known as a flash sale.

This fast-paced, limited-time promotion is designed to draw attention while boosting sales numbers. Used occasionally by some online retailers, flash sales are also employed by e-commerce companies as a mainstay of their business model.

The ultimate success of flash sales and whether they can drive e-commerce depends on how well they are designed and their ability to generate profits.

Understanding Flash Sales

Flash sales are to e-commerce what point-of-purchase displays are to brick-and-mortar stores. Like those checkout line displays, flash sales are meant to promote impulse buying by delivering deep discounts on specific merchandise within a limited time frame that consumers may find too good to resist.

Online retailers that don’t depend on flash sales to drive their business may employ them occasionally. Two reasons stand out:

  • Clearing out inventory to make way for new merchandise. Retailers can lower overhead costs while still ensuring a reasonable profit margin if prices on old inventory are set carefully.
  • Generating buzz and building a brand by developing a loyal following of customers.

While some online retailers use flash sales sparingly, other companies have built business models around the concept. E-commerce site Zulily, which caters to moms, has created an entire business around flash sales. By honing in on a highly targeted audience, the company has managed to gain a strong following and a healthy bottom line in the process. Other retailers such as Fab.com, Rue La La and Gilt Groupe have also experienced bottom-line success by using this strategy.

Challenges with Flash Sales

While companies like Zulily have catapulted themselves to success using the flash sales model, the same cannot be said for all online retailers who employ such a strategy.

Totsy, an e-tailer similar to Zulily that launched in 2009, sold off its assets and laid off its staff four years later, according to an article in Retail Dive. Fab.com was sold to an electronics manufacturer in March 2015. Zulily has managed to weather challenges that have plagued other retailers in three ways:

  • Focusing on a very narrow target audience
  • Working to earn loyalty and generate excitement
  • Making sure a variety of products are offered to ensure customers return

Making sure profit margins meet expectations is also a big challenge for online retailers that opt for the flash sale route. If profit margins don’t meet or fall short of expectations, cross-sell or up-sell plans should be in place to ensure the bottom line benefits.

Tips for Launching a Successful Flash Sale

Putting a flash sale together can help online retailers meet a variety of business goals. The following tips can help ensure a successful run:

  • Define the purpose of the sale. This can help establish metrics to determine success or failure. Goals may include such things as raising awareness, generating loyalty, earning a smaller profit with a faster turnaround or simply moving out excess inventory without facing a loss.
  • Keep it simple. Don’t make the sale so complicated buyers will pass it by.
  • Keep it targeted. Define the target audience and work to reach that group through marketing, social media and SEO promotions.
  • Create urgency. Set a reasonable time frame, but be sure to keep it tight enough to draw on that buying impulse.
  • Make the sale stand out. Flash sales should offer discounts that are significant enough to catch customers’ attention. Keep that in mind when setting pricing and selecting products to offer.
  • Dazzle. Whether a flash sale is employed occasionally or serves as the backbone of the business model, dazzling customers to earn loyalty and repeat business should be the ultimate goal. Make sure customers walk away with a positive experience by keeping service high.

Flash sales can generate excitement and interest for online retailers. Whether they serve as an occasional tool or drive the entire business model, care should go into their planning to ensure not only financial success but also customer satisfaction.

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