What is a Flash Sale?

A flash sale is a promotion or discount offered by an online store for a limited period and/or in limited quantity.

They are also referred to as holiday sales, daily sales, hype sales, launch day sales and limited inventory sales. During the sale, the discounts are more significant than those provided by regular promotions. Flash sales intend to sell a large volume of products at high velocity to make up for the aggressive price cut.

Most run for anywhere between two hours and one week. There is a fairly short but high intensity announcement period before the sales event begins which means they start and end somewhat unexpectedly.

The limited time and quantity is designed to trigger excitement, urgency and impulse buying via a fear of missing out (FOMO). Whereas the average ecommerce stores will use flash sales as one among several marketing tactics, some companies base their entire business strategy on flash sales.

Why Run a Flash Sale

There are dozens of reasons why a store would run a flash sale. Some of the more common ones are:

• Increase revenue – As flash sales play on potential buyer’s FOMO, they lead to a short-term surge in order volumes which, by extension, increases overall revenues. Prospects that have had their eye on the store or its products but hadn’t had the motivation to buy yet would feel compelled to purchase now instead of waiting for later. Flash sales can increase customer lifetime value (CLTV). It’s important to note that flash sales heavily rely on the desirability of the products so it’s essential that in-demand products are a part of each flash sale.
• Generate buzz and brand awareness – A flash sale’s success is greatly dependent on how well the event is organized and promoted. Effective promotion creates a buzz on the website, social media, email, SMS and other available touchpoints. This should create enough momentum to surge website traffic, drive word of mouth marketing from customers and accelerate customer acquisition. The flash sale can put the store on the radar of deal sites further increasing visibility.
• Unloading excess inventory – Planning inventory to consistently perfectly match customer needs is near impossible. Flash sales can be a means for a store to get rid of surplus stock fast. The large order volume can quickly clear up storage space and make more room for newer, faster selling products. That effectively lowers inventory and operating costs on the back end. It is important that an inventory flash sale is balanced with maintaining sufficient buffer levels.
• Loyalty – Offered to existing customers, exclusive flash sales can build connections, strengthen loyalty and increase the likelihood of repeat purchases in future. They can also help re-excite inactive customers and get them to buy even if they have not done so in a while.

When To Run a Flash Sale

Flash sales are most effective when they are inspired by the right business intent. The most ideal times to run a flash sale are:

• Shopping seasons – Timed to major shopping seasons to tap into the seasonal excitement. Stores can use the opportunity to move short term specialty and seasonal products.
• Product launch – Provide an important initial boost to a new product’s sales leading to better customer perception and improved market sentiment.
• Pricing experiments – Test out different pricing to boost customer loyalty among new subscribers.
• Surplus inventory – Help move excess inventory fast including products that are out of season or have been sitting in storage for some time.
• Low volume periods – Boost brand visibility and attract more buyers.
• Competitive strategy – In response to and in keeping up with competitor activity.

Best Practices

Over time, businesses have tried and tested various techniques for running a flash sale. As a result, entrepreneurs and business leaders have demonstrated what practices are most effective at building a successful flash sale. These include the following:

• Identify a goal – What is the primary motive for the flash sale? Is it to raise brand awareness, get rid of surplus stock, increase revenue, boost a product launch, attract new customers, ride a seasonal wave or all of the above?
• Identify a target audience – While flash sales can be open to the public, they are often narrowed to a specific audience such as members of a loyalty program. Whether open to the public or existing customers, understanding the target audience and tailoring the campaign accordingly is crucial.
• Pick the right products – Stores dealing in only one or a few products may not have much of a problem (or choice) in determining which ones to include in the sale. For large retailers with thousands of items, picking the right product demands a more deliberate approach. There are different ways to determine which ones would be the best fit. For example, the store could identify products on competitor sites that have negative or poor reviews. The flash sale would take advantage of the disenchantment to win customers over. Alternatively, use keyword research tools to identify the products competitors focus on and undercut them accordingly. Another option would be to choose items with low purchase volumes or high product page traffic.
• Check fulfillment capacity – Flash sale products usually sell quicker than expected. To avoid creating a sea of disappointment while missing out on the revenue boost from high sales volume, confirm that the store has adequate fulfillment capacity. That implies checking and tracking inventory levels, warehouse operations and shipping bandwidth.
• Time it right – Get the sale’s timing right depending on what items will be covered by the sale and what the seasonal buying patterns of the target audience are. The flash sale should be as contextually relevant as possible. Other than season considerations, other factors to look at include the days of the week and time of the day people most often buy, and when email open rates are at their highest.
• Keep it simple – Buyers should not have to go through numerous steps to access the sale. The terms and conditions should be clear and accessible so customers know what they do and do not get.
• Keep it significant – The discount should be sizable to distinguish it from the more regular promotions the store may offer and also from the prices buyers could find elsewhere.
• Keep it short – Physical stores have shown people are ready to forego sleep and comfort to get in a line for what they consider a great deal. Buyers need to know that sales are relatively rare and so they should take advantage of the small window of opportunity when it does arise. Promote The longer a flash sale runs, the less impactful it becomes and the lower the urgency to buy.
• Promote it early and aggressively – A flash sale won’t do much for the business if the target audience does not know of its existence. Promote it on all platforms including the website, social media, email and SMS. While flash sales ordinarily don’t have a long period of promotion leading up to the event, there should be a meaningful announcement period before to build adequate traction. Use countdown banners or messages to get people to be on the lookout for it.
• Provide high quality customer service – The importance of forming a positive emotional bond with buyers cannot be overemphasized. While the bargains are definitely an exciting proposition for customers, their allure can be marred by woeful customer service. Flash sales are most meaningful when buyers leave with a positive view of the brand.

Risks and Mistakes to Avoid

While flash sales are generally a good thing, they are not without risks.

• Erode margins – Flash sales are often anywhere between 40% and 70% off normal prices. They bank on a spike in order volume to make up for the reduced profit margin. If the anticipated rise in transaction volume does not happen, the store risks making a loss.
• Attracts one-time buyers – Bargain hunters will take time scouring the Internet looking for the lowest possible prices for an item they are interested in. As such, they have no loyalty to any one store and have no intention of coming back in future.
• Failure to deliver – If the store fails to adequately prepare for a temporary surge in demand or if the demand is greater than anticipated, this could lead to premature stock out, shipping delays, fulfillment failure, inadequate customer service and a deterioration of website performance. The flash sale could irreparably damage the store’s reputation.

History of the Flash Sale

The flash sale was pioneered by online retailer Woot.com in July 2004 in a deal of a day format. In addition to browsing the company’s online store, you had a 24 hour window each day to take a special deal or ignore it.

The following day, a new item appeared with the same 24 hour sale deadline. The types of items that appeared in the daily special could hail from anywhere in the Woot inventory—from everyday, mundane computer supplies to quality consumer goods. Since then, flash sale-centric websites exploded across the Internet, seemingly multiple ones for every type of consumer industry.

Perhaps the biggest flash sale success story is that of Groupon. Right up around Q4 2010, the company turned down a $6 billion buyout from Google, inspired over 500 types of copycat services, and garnered over $850 million in sales in the United States.

Six months later, Groupon launched its IPO with an organizational value priced around $13 billion. Around this time period, franchise tech companies such as Google, Facebook, and Amazon began to flirt with the daily deal phenomenon.

Why Flash Sales Worked

One of the major reasons why flash sales were so effective was that during their heyday, the American economy was still feeling the effects of the market crash. People needed to save up on money as they lost their jobs and struggled to make ends meet.

With the flash sale, you have something extremely cheap for a limited time that could provide you with quality entertainment. Instead of splurging money on high tech gadgets and various beauty parlor visits, you instead could treat yourself to a cheap salon day pass or highly discounted consumer goodies.

In response to a depleted economy, flash sales made everything fun and interesting again and disrupted the typical brick and mortar or online retailer business plan.

Additionally, because of the sometimes-needed participant quotient for a deal to activate, deals became popular shares across social media. Users would encourage their friends to join in on something for a chance to bond. Factor in a time requirement element for deals, and all of a sudden you have large social media presence.

How Flash Sales Faltered

After a year in the public market arena, Groupon lost about 80% of its stock value. Sales were falling alongside the number of local establishment partnerships that the company had carved out.

For the rest of the flash sale market, a large number of the small copycat ones got swept away, though the more established ones continued to carry on, albeit at a more downscaled level.

Several different factors can be pinned to the fall of flash sale sites. Perhaps the biggest one is the shift in consumer behavior. One term that came from this entire craze is flash sale fatigue.

As people used flash sale services, they were signed up to the ecommerce site’s email listserv. If you participate in a flash sale on a dozen of different sites, you would receive daily/weekly emails from each of them. Things got pretty crazy for the average email box.

Marketing messages started to blend in with each other. Consumers began to tune out when viewing subject headers. Opt-out rates began to climb. People got burnt out from feeling the need to purchase at a discount price all the time. As a result, the number one direct advertisement channel lost its edge.

You can look at the economy’s recovery as another reason for the fall. As people began to go back to work, expendable income once again was on the rise, and along it was retail shopping. The tried-and-true business model received a second breath of fresh air.

As a result, there was less fire sale surplus to go around for flash sales. People also began to be more patient with their money and used technology to research products thoroughly before purchasing them. This allowed them to find pricing for items that was on par with flash sales’, without feeling rushed by the daily deal window.

Additionally, a number of flash sale ecommerce stores offered less than favorable shipping rates and return policies. These two elements are key in building a loyal customer base and generating favorable word of mouth.

Lastly, the flash sale business model proved unsustainable for those who offered goods services at a highly discounted rate. The reason why many local establishments partnered up with Groupon was that they saw Groupon as a chance to build their customer base.

Theoretically, a Groupon customer would be exposed to your services because of the discounted rate, be pleased, and become a regular returning customer, resulting in a long term net gain. The reality was completely different.

Many stores lost money because Groupon users would only put down money for the original deal and not return, some businesses had to dip into their own funds to honor the sheer explosion of discounted sales, and customers who did not have their Groupons honored trashed businesses’ Yelp pages to harm their brand.

Groupon’s negative effects on local businesses have been well documented on the Internet, and the company began to gain notoriety as a poor business partner.

Wrapping Up

While flash sales can be an invaluable asset for ecommerce stores, there is always the risk of too much of a good thing.

Avoid running too many sales as that takes away the appeal, leads to flash sale fatigue and eventually causes diminishing returns. Flash sales can also dilute a brand’s perceived value.