Since Woot.com pioneered the flash sale with their “daily deal” format in 2004, it has become nearly impossible to find an online retailer that doesn’t utilize some form of the strategy. Perhaps the most controversial is Groupon, which at its peak had garnered over $850 million in domestic sales in addition to turning down a $6 billion buyout offer.
It was around that time when the likes of Amazon and eBay began to experiment with the flash sale phenomenon, which continues to net the former company hundreds of millions of dollars within the span of their famous Black Friday and Cyber Monday events.
Today, however, Groupon is a shell of its former self, and other companies that lived on flash sales, most notably Fab.com, aren’t exactly in a good space either. But how does this translate to your business? Are flash sales still effective enough for you to benefit from them?
Reasons to Run a Flash Sale
Flash sales create a strong sense of urgency by playing on our fear of missing out. This makes them an easy way to rapidly move large amounts of stock in a short period of time. If you need to make room for new inventory by getting rid of seasonal products or breaking even on poor-selling items, flash sales are a considerable solution.
This is especially true for businesses that experience high inventory carrying costs where overstock can pose a problem. Flash sales cause a considerable increase in transaction rates, which can provide a useful revenue boost during times of need. That is, if you know how to run a successful flash sale.
Excitement and Loyalty
As an ideal combination of exclusivity and good value, flash sales can generate excitement. They do have the potential to increase loyalty as well, albeit depending on how you do it. The problem is that flash sales generally attract one-time customers that are simply buying from you to get the specific deal.
They can have the opposite effect, though. For instance, you can host flash sales that are only available to your most loyal customers or those who complete certain actions, such as sharing something on social media. This way, you can foster stronger relationships with your target audience and increase engagement.
What About Profit?
Of course, a flash sale is only a flash sale if you provide steep discounts on your products. But that can hurt your profits. The key to success here is attracting the right customers – that is, those who will come back and buy more. This way, your flash sales aren’t just bringing in deal hunters who simply want the discount but don’t offer loyalty.
Getting this right is largely a matter of knowing what to do and performing extensive tests. You should know which high-margin products are the most popular among your audience. You’ll also need a good marketing plan and analytics tools to track customer behavior when the sale begins.
Flash sales clearly have potential, but you need to approach them carefully. Done right, they can bring major benefits to your business.
