The state of flash sales has been a fervent topic
of discussion for a few years now, with the once-thriving business model
undergoing a steady decline after hitting its peak in the late 2000s. With
LivingSocial laying
off more than half its workers and Groupon exiting
seven countries, the last big players in flash sales/daily deals are
struggling to find financial success in the way many of their competitors did
before folding or being bought out.
The RTP team
examines the missteps of LivingSocial and Groupon to discuss whether there is
room for flash sales as a major portion of an e-Commerce offering. The team
also debates how the model can be deployed most effectively going forward.
Debbie Hauss,
Editor-in-Chief: If these companies are not able to deliver on their
product promises, then they will fail. I had an unfortunate customer experience
with Groupon during the most recent holiday season: I ordered some products and
most of them showed up, but one never did. I waited to learn about the fate of
the order and it took several weeks until Groupon eventually just cancelled the
order completely. I was disappointed twice: once when the product did not
arrive in time for the holidays and a second time when the order was
permanently cancelled. I will definitely think more than twice the next time I
consider ordering from Groupon. I also have had good experiences and bad ones
with more niche sellers, such as WTSO (Wine Til Sold Out). WTSO offers great
items and free delivery (on four or more). I am yet to be disappointed by this
company. On the other hand, I was tricked into a membership at Wine Awesomeness
after I took advantage of an offer through Gilt Groupe. They subsequently
cancelled it but I won’t be a customer moving forward.
Adam Blair, Executive
Editor: At first glance daily deals and flash sales would seem to fit
perfectly with today’s always-connected, bargain-hungry consumer. So why
are they acting like a “flash” in the pan? One problem seems to be on
the delivery and execution end: too many SMB retailers, overwhelmed with
Groupon-bearing customers, were unable (or unwilling) to fulfill suddenly surging
demand. But a more basic issue is that these sites weren’t sufficiently able to
curate and personalize the offers they sent to individuals. Inevitably, the
excitement of finding out “What’s on sale today?” was going to give
way to “What’s on sale today that I might be interested in buying?”
In an era when we keep hearing how the customer is in the driver’s seat, every
retail business needs to include relevance and contextualization as
key parts of its business plan. As a recent Retail TouchPoints Executive Viewpoint noted, “The key is to focus
on putting the power back into the hands of the consumer and make the goal of
discount shopping about what customers want, and not what businesses want to
get rid of.”
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Alicia Fiorletta,
Content Strategist: It seems like all daily deal and flash sale brands have
had their bumps in the road at some point or the other. In the case of
LivingSocial and Groupon, it seems like there are issues with not only creating
compelling deals for local audiences but also being able to fulfill on demand.
However, for more apparel- and accessories-based brands, the struggle is
onboarding a solid assortment of designers and products, rather than just
taking whatever excess inventory they can get their hands on. Rue La La seems
to consistently do a solid job of curating sales based on specific fashion
trends or themes, and also uses personalization to keep customers engaged and
in the loop with sales featuring their favorite designs. Although the actual
product assortment can sometimes be hit-or-miss, those touches excite customers
and keep them coming back for more. But these companies need to constantly
improve their experiences because department stores and other retailers now
have the ability to hold similar sales and deals across channels.
David DeZuzio,
Managing Editor: Groupon and LivingSocial are still great sites to go to
for a good bargain on a broad-based list of items. The trouble is, they lack
the personalized and contextualized retail model that today’s shoppers crave.
They are also not the only game in town as hundreds of other deal sites and
apps have sprung up offering similar or better deals. The hottest flash deals
are being offered by smaller companies with independent sellers and
personalized experiences such as Rue La La and LulaRoe. In the case of apparel
retailer, LulaRoe, shoppers are encouraged to become sellers or host pop-up
boutiques in their home. Quantities are very limited and sales only come once
or twice a month. And once an item is gone, that’s pretty much it. For example,
if you were the lucky purchaser of this pair of cat-print
leggings you and maybe five other people in your area have them. This creates a
feeling of exclusivity and builds a rabid customer base who are constantly
waiting for the next sale alert. Groupon and LivingSocial should come up with
boutique divisions that curate apparel or home goods or whatever category they
choose. They may be able to reconnect with their customers and build something
a little more personal rather than just being the faceless Walmarts of deals.
Klaudia Tirico,
Associate Editor: While I’ve never had a bad experience with daily deal and
flash sale companies, I can understand why Groupon and Living Social aren’t
appealing to consumers anymore. These sites rely on email marketing to garner
interest, but it seems as though their strategies haven’t changed since their
inception. As I write this, I am looking at an email from Living Social. The subject
line reads: “Hot Air Balloon Ride.” Instead of promoting how much I can save or
using a play on words, Living Social chose the least-intriguing subject line to
try to get my attention. On the other hand, Gilt does a great job in keeping me
engaged and excited to see its deals. The subject line from a Gilt email in my
inbox reads: “It’s in the bag: Rebecca Minkoff is back on Gilt.” Now that’s
something that will get me to click. It’s clever, witty and name-drops the
designer. Moral of the story is: Paying attention to the little things will set
you apart from your competitors.
Glenn Taylor,
Associate Editor: It’s no secret that the flash sales industry isn’t what
it was six or seven years ago, with its boom likely benefiting highly from the
2008 financial crash. The rise of Amazon in addition to the introduction of
fast-fashion chains have both given consumers more options when it comes to
cheaper purchases and omnichannel fulfillment, seemingly taking away some of
the main advantages flash sale retailers had in the space. The gimmick itself
can be used to portray urgency when it comes to sales, and still holds value to
brands because of this, but the long term ramifications just never appear to be
profitable enough to base an entire business around. The value of these
retailers as a whole has dipped in accordance with this reality. Case in point:
Gilt
Groupe was valued at approximately $1.1 billion in 2011, yet sold to Hudson’s
Bay in January for only $250 million. By the same token, although QVC
purchased Zulily for $2.4 million in 2014, Zulily had actually been valued
at $4 billion when it launched its IPO the year before.
