Warning: Contains radishes.
What is a flash sale?
As a customer, you’ve probably heard about flash sales before, a brief chance to get your hands on that giant flat screen TV, that adorable designer top, or those kicking trainers that you’ve had your eye on for so long, but for a fraction of the price.
But, why do businesses do flash sales? How do they work behind the scenes? And, more importantly, could you harness the power of the flash sale?
Flash sales are restricted sales of products or services. The restriction could be the amount of time that the sale is on for, for example, 24 hours, or they can be an “Everything Must Go!” sale, where they run until the entire product line has been sold.
It’s usual for businesses to offer big price cuts during a flash sale, but they can also offer other bargains such as two for one offers, extended warranties or buy now pay later, to name just a few.
Who harnesses the power of flash sales?
An example of a business that uses flash sales very effectively is Amazon. Amazon makes it part of its ongoing strategy to provide offers on products throughout the year to keep customers coming back time and time again.
Amazon offers two types of flash sale, surprise flash sales, known as “Lightening deals” which, like lightening, suddenly appear for a brief time before vanishing. This type of flash sale tends to increase impulse buying which, as we will discuss later in this article, may not always be a good thing.
The other, and most famous, flash sale that many retailers take part in, including Amazon, is Black Friday and Cyber Monday. Black Friday began in the USA in high-street stores but, over time, has gained huge traction with online commerce. The sale, to begin with, lasted for just one day, the Friday after Thanksgiving though over time this has become an entire weekend of deals.
On Black Friday Amazon takes upward of a billion dollars and accounts for over half of all internet retail during the sale. So, any profit Amazon may lose in price reductions, it more than makes up for with sheer quantities of sales.
Black Friday and Cyber Monday, as well as several other planned sales days, are part of Amazon’s ongoing business model and, when dominating over half of sales during such times, it is the industry leader of flash sales.
Why have a flash sale?
Take our fictional startup online business, The Rad Radish Company, providing locally sourced and delicious radishes direct to customers. I realise that, unless you keep rabbits, like to impress rabbits, or are a rabbit, the concept of buying several kilos of radishes each week may be ridiculous, but bear with me…
So why would we, like Amazon, decide to do a flash sale?
There has been an excellent crop this year and The Rad Radish Company’s warehouses are bursting at the seams and still, radishes are being plucked from the ground and are being driven by happy farmers to The Rad Radishes storage facility.
We decide to engage in a flash sale to make space in our warehouse. Yes, we won’t be getting full market price for the sale but the reduced prices will encourage customers to buy our stock so that we can store and then sell further stock which, in the long run, means we can make more money.
Refreshing product line
Furthermore, radishes, as delicious and colourful as they are, only have a certain shelf life which means we need to get them shifted, pronto.
This also goes for other perishable food items, but also includes fashion or electronics where new versions are constantly coming to market meaning that old stock declines in value and needs to be shifted to make space for new items. Sitting on a delivery of 2012 leg warmers might turn a greater profit in 30 years time when they come back into fashion, but that is valuable space that can be used for more current products.
This month has been a bit expensive and all of our fortune is tied up in twenty tons of radishes. A flash sale is a quick and easy way to unlock that value by selling stock below its market price. Of course, this will cut into our profit margin for the year, but, at a pinch, it can help us release some equity.
Increase brand awareness:
We will advertise our flash sale to maximise its exposure. We want people from everywhere clamouring to get their hands on our delicious, high quality yet low-price radishes.
Also, many money saving sites scour the internet for the best deals. If we do a flash sale, it will appear in these searches and put The Rad Radish Company on the map. This has the added benefit of drawing more traffic to our Rad Radish website which will further improve our internet rankings.
The dangers of flash sales
So, flash sales have some great benefits when used right. But, when should we *not use a flash sale? When is it too much of a risk? When might it actually damage that all important bottom line?
So, we set up a flash sale, we took out some expensive advertising, we got more people on the Rad Radish hotline, ready to take orders… but, no one called. Not one person.
And this can happen. Running a flash sale takes investment, from our time to set it up to the cost of artists for advertising and, if the flash sale doesn’t gain traction on the internet, it can be one big horrible flop. Not only have we lost money on this sale, but we now have several tons of unsold radishes slowly fermenting in our warehouse.
Huge businesses like Amazon can absorb such losses, but we can’t, we are too small and, in the cutthroat industry of radish sales, our profit margins are tiny.
It is very important to consider what could happen if a flash sale fails. Can you afford it? If you can’t is there anything you can do to soften that financial blow?
In this scenario our flash sale of radishes was a success. Right up until one of our two computer servers buckled under the load of customers desperate to get their hands, or paws, on dirt cheap radishes.
Furthermore, aunt Beverly, who was manning the phones, has had a quiet melt down and locked herself in the toilet.
Is your businesses infrastructure ready to take such a load of traffic? The issue is, you most likely never have tested your systems to the limit and, without trying it, you might not know. So, it is important to make sure that nothing on your end fails and ruins an otherwise successful flash sale.
Impulse buys and returns
Norman, an impulsive shopper by nature, is working at his desk. He receives an alert that a new startup, The Rad Radish Company, are running a flash sale and offering a huge discount on radishes. Instantly Norman’s credit card is in his hand and he’s purchased 20 kilos of radishes.
Two days later, upon receiving his bulging boxes of vegetables, Norman feels huge regret at his impulsive purchase and decides to return his radishy delivery.
As part of our customer care, we cover all costs of returns so now we must pay for Norman’s folly by paying postage on the package, then we must restock the radishes and refund Norman’s credit-card payment. Overall, we have made a loss with this sale.
It is inevitable that there will be returns, so this needs to be factored into the costs of running the sale. Also, returned items are not usually resold at full market price so the further loss in value of the product needs to be considered.
Certain companies that sell high end products such as Apple, (selling computer hardware, not apples) rarely engage in flash sales and, even when they do, the savings are minimal. This is down to perceived brand value.
Our direct competitors, Radish Monster, are constantly having huge flash sales, so much so that people are starting to wonder why they don’t just sell their radishes cheaply all the time. Furthermore, around the radish community there have been whispers that Radish Monster’s produce isn’t even locally grown, rather it is imported from Peru for a tiny cost but leaving a Sasquatch sized carbon footprint.
By not having flash sales all the time, if at all, we are maintaining an image of quality, of certainty in our product that it is worth the extra few pennies per kilo.
In some cases sales, if used aggressively, can devalue your business’ perceived worth and make your business seem to have an erratic sales strategy. Moreover, the unfortunate customers that buy from you when there is the rare occasion that a flash sale isn’t happening, will lose trust in your brand and shop elsewhere.
Questions to ask yourself
What do you want from the sale? To shift stock? Increase brand awareness? Unlock equity? These can all be done with a flash sale though, there are many other means of meeting these targets.
Do you have the resources to launch and successfully run a flash sale? Do you have the manpower? Do you have hardware that can deal with the increased load of customers? Do you have the logistics in place to deal with increased shipping, returns and customer support?
Will the profit from the stock cover the expenses of running the flash sale such as technical support, call centres, customer support etc?
How might a flash sale impact on your brand identity? Could it increase exposure? Or could it erode existing customer trust?
Do flash sales fit into your overall business strategy? Or could it conflict with other ecommerce models you are using?
Finally, can you afford a failed flash sale? If not, there are many other ways of improving your businesses health with far less risk.
There are many factors when considering using a flash sale. In the greater scheme of ecommerce, it is just one tool of many. When it is used correctly it can be used to impressive effect, as with Amazon, or when used poorly, can damage brand image and the bottom line.
More recently flash sales have been on the decline, mostly down to more advanced methods of stock control and market projections. In this way, online retailers are able to offer lower prices more consistently throughout the year.
Naturally, flash sales can be used effectively to fix short term issues.
Like this huge pile of radishes that we need to shift before they go a bit funny… why did we buy so many radishes?
Note: The Author has very little knowledge of the radish trade so information regarding radishes is for illustrative purposes only. The author doesn’t even like radishes.