The Evolution of Daily Deal Sites
Out of the Great Recession came a fun twist on e-commerce: flash sale sites, which combined the art of the deal with wallet-friendly prices – and consumers flocked in droves. Three years later, though, these sites are evolving, whether through wider product offerings, e-zines, or even full-priced merchandize, just as regular retail is also attempting to wean consumers off steep discounts.
Be it through a flash sale or a regular web site, consumers do not want to pay more than they have to. When shopping for clothes online, 81% of shoppers say they learn about the product by looking up its price, as well as information on discount coupons (50%) and shipping promotions (50%), according to the Cotton Incorporated Lifestyle MonitorTM Survey.
Envirosell’s Paco Underhill, CEO, says this is the ongoing saga of the apparel business.
“We all recognize there are so many things in our lives where the costs are non-negotiable — like cable or mobile phones,” Underhill says. “But in apparel, the price is always negotiable. Somebody has to exercise some form of discipline.”
Flash sales sites bank on consumers’ reluctance to pay full price. Daily emails capitalized on this with alerts to each day’s promotion, but too many emails may have a negative consequence — and they might not be the most effective means of attracting the consumer.
Among consumers who buy clothes online, just 26% start shopping via email from retailers or brands, the Monitor finds. Shoppers are more likely to begin shopping right at retailer or brand websites (64%), followed by search engines (31%).
Underhill says the problem with flash sales is that consumers reach a point of oversaturation.
“People’s attitudes toward social media and the Internet are in a constant state of evolution,” Underhill says. “We’re approaching major precipices, one being people are becoming overwhelmed, and they start to shut it down because too much is thrown at them.”
Currently, just 3% of online shoppers buy clothes from membership sites like Gilt, and Rue La La, the Monitor shows, despite the fact that 85% of consumers browse the internet for apparel and 72% buy clothes online.
"People's attitudes toward social media and the internet are in a constant state of evolution."
But interest in deal sites is still there. comScore, Inc. recently found that in the first quarter of 2012, apparel flash sites increased their monthly unique views year-over-year, with HauteLook.com jumping 85%, Ideeli increasing 63% and Gilt Groupe growing 46%, although it was down 9% since the start of the year. To perhaps counter any softening in flash sale interest, Gilt has added Park & Bond, a full-priced men’s designer arm, as well as its e-zine Gilt MANual.
Retail.org reports combined flash sale volume is predicted to reach $6 billion by 2015.
Overall, flash sale sites had 46.4 million total U.S. visits in March 2012, an increase of 31 percent over March 2011, according to Experian Hitwise, a surveyor of online consumer behavior.
“The emergence and sustained growth of flash sale sites as a category occurred before one could even blink,” says analyst David Selinger, CEO of RichRelevance. “This is a perfect example of how rapidly the demanding super consumer will shift her spending patterns when she finds a model that she loves.”
Selinger describes the “super consumer” as one who “is responsible for driving the creation of new markets, new products, technological innovations, social media activities and general consumption.
“She is fearless and opinionated, posting her shopping experiences to the blogosphere and social media challenges. Thanks to the plethora of user-generated product reviews, recommendation and detail specifications already available, her knowledge is practically limitless. “
Product reviews are very important to today’s consumers. Of those who buy apparel online, 61% say reviews are “very or somewhat influential” to them, the Monitor finds. This figure jumps to 71% among those age 13-to-24 and 66% among 25-to-34-year-olds.
This “super consumer” could help grow the flash sale market, or change it altogether.
BDO USA’s Stephen Wyss, partner, says flash sites just have to deal with some of the same problems regular retailers go through.
“The market became saturated. So now flash sites have to build customer loyalty, and they can do that by making it easier for shoppers — so they don’t have to go to seven different sites for the best deals.”
Technology will continue to change the business model for flash sales — and retail overall, Underhill says.
“Flash sales won’t exist three years from now as they do now. They’ll be much more customized to each shopper and eminently more local. Private shopping bots will scan what’s on sale, keep track of what’s in your closet and see what fits your lifestyle. They’ll wade through everything for you — not just flash sites.”