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The Pros And Cons of Flash Sales

Posted by Meg N. on May 18, 2017

People don’t buy for logical reasons. They buy for emotional reasons.

—Zig Ziglar

It is for this very reason, emotion rather than logic, that retail ecommerce websites send marketing emails promoting Mother’s Day gifts and encouraging consumers to be trend setters among their peers. Most of the time, people do not need what they buy. So, effective marketers blur the lines between need and want. And this is precisely why flash sales have worked. They excite consumers and tempt them with limited-time offers that ‘may never be available again’. Marketers even have a term for it: FOMO (Fear of Missing Out). However, while the practice remains successful in the travel and event industries, flash sales may not always be the best bet for stores relying on discounts to help motivate emotional buying, 

The Pros And Cons Of Flash Sales

Flash sales can be a great way to push a business’ top line sales, which is exactly why Black Friday has gained such popularity. There are a number of reasons behind flash sale success:

1. Converts Leads: Consumers like to browse websites. They window shop. They fill up their carts and leave unless there is a sense of urgency. Flash sales motivate them to make a quick decision. A discounted product in limited supply encourages visitors to lower the threshold for trying a new product or stocking up on something they know they like.

2. Stock Liquidation: Although technology is improving, it is almost impossible to perfectly anticipate demand for a product. If a brand sells out too quickly, they leave money on the table.  Over-estimating demand creates the need to store merchandise while it quickly falls out of favor with fickle consumers used to the quick turns of fast fashion. People are more willing to buy an item that they don’t absolutely love if it is on sale.

3. Brand Awareness: Flash sales can be an excellent way to spread awareness about a new brand. The industry's rise has been in parallel with social media's ability to make an offer "go viral."  Additionally, flash sale sites have built up a prequalified audience of motivated customers.  Smart brands will identify the sites that compliement their existing customers and share customer data, which isn't always the norm.  When they work well, the brand will be exposed to an entirely new group of potential customers. 

While flash sales have a long list of benefits that accompany them, they are not always the best choice. They can give off the initial appearance of increased demand and excitement, but they can also diminish the brand.  Luxury accessories brand Coach has pulled back inventory from flash sale sites like Gilt and stores that have become overpromotional.

1. Message: Before choosing any off-price strategy or flash sale, a brand must consider the effect it will have on the image of the company brand. For luxury brands, it is an automatic warning light. Training customers to expect sales diminishes the value of future product while also lowering the perceived value of product that was already purchased at full price.  If a premium brand is considering a flash sale, it should be on entry-level product that can expose younger or aspirational customers to the brand without diminishing the value of the core product line.

2. Profit Sharing: Brands will want to create some distance from their traditional channels and their off-price product.  Brands who decide to work with a partner for a flash sale should expect to share a significant portion of the revenue with them, further reducing the margin. Most of the product found on flash sale sites will bring nominal or negative margins to the manufacturer.flash-sale_industry_revenue_QYoSLfx.png

Do Sites Dedicated To Flash Sales Work?

Occasional flash sales can work well for a business. They can bring in new customers, help to get rid of old stock, and help companies generate cash flow. However, as the model has lost favor from luxury manufacturers, the days of guaranteed flash sale success are over.  Here are some better, proven ways to improve sales on your own site, without discounting your product or diminishing your brand.

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Topics: Black Friday, Ecommerce, Marketing, Retail, Digital marketing, Strategy, Discounts, performance marketing, Flash sales

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