Discounting has become big business in a changing retail landscape where consumers never expect to pay full price for a product. Brands wanting to meet those expectations of money-off deals – but not damage their bottom line – are being thrown a lifeline by ‘flash’ sales sites that offer members big discounts on branded goods for a strictly limited period.
“There is an expectation today that all brands, no matter how big, will discount,” says Alex Saint, chief executive of travel flash sales site Secret Escapes. “There used to be a view that discounting through any channel could damage brand perception. But consumers understand now that brands won’t always sell at full price.”
Whether they visit outlet centres or receive direct emails from retailers, such as Gap, offering exclusive deals to those who have signed up to the service, consumers have a fluid concept of price and value, says Saint. He says very short-term sales are an obvious extension of the trend in offering deals, with most consumers associating the internet with value.
“I can only see use of flash sites growing,” says Saint. “But I do think consumers will weed out the ones that aren’t doing a good job for them.”
Quentin Griffiths, managing director and co-founder of home and gardens flash sales site Achica, agrees. The evolution of shopping has already seen a structural shift in favour of online sales and is now seeing a further move towards a model based on deals, he says.
“Everyone loves a deal and one of the great goals in marketing is to come up with a business that changes consumer behaviour. That is a very powerful proposition.”
Brands benefit from participating in flash sales too, Griffiths says. “About 700,000 people get our daily newsletters. And that’s got a huge marketing and media value. So beyond the sale, the real value is brand awareness.”
“It’s an amazing showroom for a brand,” adds Saint of Secret Escapes. “If you are picked for a solus email, it goes out to more than 1 million people.”
But brands that use these websites to promote their products must be careful not to use them too much, warns Richard Sellwood, managing director of lighting brand Anglepoise.
“If you are doing it too often, it would undermine the retailers that are putting faith in your brand and stocking your products,” he says.
In the home and garden sector targeted by Achica in particular, this kind of exposure allows small companies providing quality products to reach a big market, says Griffiths: “A lot of the brands people may have heard of, and some they may not, but often you are buying the design and the quality and the history of the product. You are not buying a name, like you might with a Dolce & Gabbana or Gucci.”
With early adopters of these types of short-term sales hooked in by cheap deals on fashion ranges, more specialised flash sales sites are now ripe to be adopted by increasingly mainstream consumers, both Griffiths and Saint believe. Achica is growing by about 100,000 members a month, while Secret Escapes expects its 1.4 million membership to double in 18 months. The two sites have formed a partnership enabling Achica to offer its members travel deals from Secret Escapes.
In a bid to grow membership, flash sales sites have become easier to join. “We started with more of a bar to entry than we have now,” says Saint. “We felt the exclusivity of the club was an important element, but I have now revised that view. The exclusivity part is in the products. We only take an email address when people sign up. We want the bar to be as low as possible.”
Griffiths and Saint also agree that standards on flash sales sites, in terms of service and products, must be high to keep customers coming back. Clear and honest pricing, including absolute clarity on the true size of discounts, is essential to that, says Saint. There should also be a high level of editorial control to keep up the standard of offers, he says.
Flash sales can be an effective way to expose a brand to a large audience, which can be particularly helpful for a start-up enterprise with a smaller marketing budget
While some sites are experiencing swelling memberships, helped by high-profile ad campaigns, consumers are not universally happy with the service they are getting. Just as flash sales operators claim they are becoming part of the mainstream retail landscape, deals site Groupon has been hauled over the coals by the Office of Fair Trading (OFT).
The OFT has accepted undertakings from Groupon that it will change a number of practices after an investigation found widespread breaches of consumer protection regulations.
In particular, the OFT expressed concerns about “reference pricing, advertising, refunds, unfair terms and diligence of transactions with merchants”.
Cavendish Elithorn, senior director in the OFT’s goods and consumer group, says: “Collective buying can offer real benefits for both consumers and merchants. The market is growing rapidly, but it’s important that shoppers benefit from consumer protection law as well as from the discounted offers.”
Groupon joint managing director Tobias Tschoetsch insists that despite its problems, the deals website provides brands and consumers with something compelling. “We provide a platform that gives local businesses very effective, targeted exposure. Many businesses benefit from our subscriber base who are signed up to our daily email alerts. We offer a way for them to connect with the people they want as customers,” he says.
Tschoetsch says brands should see flash sales as something to provide awareness and customer acquisition, but cautions that they should be ready for increased demand. “Businesses should always make sure they are prepared to manage the capacity that offers generate and aim to service customers well and encourage repeat visits,” he says.
“Customers want choice and new experiences tailored to their interests. We’ve come from one deal a day and we have now built a selection of deal offerings every day. Our aim now is to make our deals more relevant to our customers by personalising them, seeking out more great experiences to bring them to our customers and offering them in more locations.”
Brands in the spotlight
The classic Anglepoise lamp was launched in 1935 by a company that had been founded half a century before. But the brand, which has seen sales growth of 30% this year, is still looking forward and is becoming a keen exponent of flash sales.
Anglepoise managing director Richard Sellwood says sites such as Achica offer it a cost-effective way to promote itself to an engaged audience, as well as being a tactical tool that is ideal for the launch of new products. Anglepoise tends to offer discounts of between 30% and 50% on Achica. “The whole concept, and it doesn’t work if you don’t do this, is that it offers a genuinely great saving for the customer,” he says. “They should be current products at a great price for a very short time.”
Sellwood is pleased that the partnership with Achica has seen Anglepoise lights featured in the flash site’s TV ads, as well as in its emails and printed magazines. “We’ve got a big brand name but we are a relatively small company,” he says. Exposure to large numbers of homewares customers can be a real bonus for the brand’s classic ranges. But he adds that when taking part in flash sales, it is important to remember a brand’s other obligations.
Taking part in very short-term sales too often could be unwise, Sellwood agrees. “If you were to do it too frequently you would risk brand dilution, but I think the fact that we tend to do it infrequently, and only for three to five days, means that at present that isn’t the case,” he says.
In a constantly changing market, consumers are always finding new ways to get the branded products they want, and Anglepoise is happy with the brands it keeps company with on Achica, says Sellwood. “I think brands have to embrace it, quite frankly, and find a way that it can work for them. Certainly at the moment it works very well for us. These flash sales sites are not going to go away and as long as their service levels are maintained they are going to get bigger.”
Founded in 1995, QD Design is a small, family-run company set up to import antique Chinese furniture to the UK. It has since evolved into designing its own ranges, which are manufactured in China using traditional methods. It sells via promotions on flash sales website Achica.
Noleen Willis, who handles sales and marketing at QD Designs, says: “As a trade supplier, we don’t actively promote ourselves to the public. Our relationship with Achica offers us a high street presence that extends beyond our usual reach.
“We can promote the whole of the range to Achica’s database, which to us is an unrivalled opportunity. We have our own database and we do our own promotions, but it is on a considerably smaller scale than what Achica can offer.”
To be relevant for QD Design, a flash sales site must offer a degree of editorial control, which means not just presenting products in an appropriate way but presenting them alongside other brands they are happy to be associated with, says Willis. When those conditions are met, the benefits can come quickly. “Every time we are featured in an Achica promotion, we get about 30 or 40 people registering over two or three days, while normally we would expect one or two registrations a week.”
To a small company, there are further benefits to being involved in flash sales. “It acts as a very efficient market research tool,” says Willis. “Normally, we can’t get an audience of that size to look at our products and make selections. It allows us to look at customer opinion, to refine and develop what we are working on, to extend or restrict the choices we have in furniture styles or colours, and to introduce new ranges in response.
“The Achica promotions are allowing us to develop the business in a way we probably wouldn’t be able to do otherwise, because we wouldn’t know audience reaction to something on that kind of scale.”
The company is not concerned that it might create pressure to discount further in the future, believing that customers have a good understanding of what flash sales represent, says Willis.
- Brands must consider what other products are going to be on offer before agreeing to appear on a flash sales site, so that they are surrounded by other relevant offers.
- Taking part in flash sales shouldn’t become regular occurrences otherwise it could devalue the brand.
- Flash sales can be an effective way to expose a brand to a large audience, which can be particularly helpful for a start-up enterprise with a smaller marketing budget.
- To build trust in a brand, the offer must be real. Buyers will soon realise if a brand is trying to rip them off.