Flash sales on the nose?

In the US, flash sale sites based on delivering limited time, members-only sales have witnessed explosive growth in the past few years. However, a recent article on CNNMoney reveals that the exponential growth is slowing, and consumers may be tiring of the endless flash sale emails.

According to American Express Business Insights, spending on flash sales grew 21 percent last year, whilst a year earlier spending grew 92 percent. More alarmingly, ComScore indicates that traffic to Gilt, America’s largest members-only shopping retailer, has fallen 9% since the beginning of 2012, while traffic to group buying pioneer Groupon has fallen 17%.

The slowing growth brought about the shutdown of more than 100 smaller deal sites, according to the article, while the likes of Gilt are expanding into a broader range of categories to stay competitive. They’re also taking a cautious step back from the flash sales stigma.

“We’ve diversified a bit,” said Andy Page, President of Gilt, “and as a result of the changes, there’s a lot more time spent on the site, and that’s good for us. We’re trying to be responsive to a customer’s entire aspirational shopping needs and wants.”

However, according to Daniel Jarosch, Managing Director of brandsExclusive, the story contradicts the reality.

“Group buying is not the same as private sales,” he says. “While private sales sells the actual product and controls the whole e-commerce value chain from production to fullfiment, group buying sells vouchers.”

Jarosch says that it’s also slightly misleading to cite Gilt as the primary example of flash sales. “Gilt is an amazing company and a fantastic brand but in a very high-end niche of the overall market, with a large percentage of inventory, which is not reflective of the majority of private sale sites,” he says. “Vente Privee, Fab, ZuLily, OneKingsLane and many other private sale sites are seeing excellent growth.”

What Jarosch does concede is that daily email fatigue is setting in, with competition for the inbox fierce and often little differentiation between the multitude of offers assaulting customers daily.

“If you can’t differentiate, you can expect growth to slow,” he says. “Competing on price alone is unsustainable–you have to be able to compete on brand, relevance and inspiration.”

The flash sales market has plenty of life in it yet, with figures dating back three decades indicating there is plenty of untapped potential.

“The unplanned purchase market in retail is double the size of the planned purchase market,” says Jarosch, “and has been so for the past 30 years.”

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