Flashy Funding for Flash Sales Reflects an Evolving Retail Market

Flash sales sites, where you’ll find great deals on high end products for just a few hours at a time, have greatly transformed the way we shop online.  People flock to these sites daily, waiting for a new deal to come up and quickly grab it before time runs out.  Some brick and mortar shops have already adopted this trend, offering flash sales of their own.

“Consumers love to get a deal the thrill of the hunt is part of what women love and that’s what spurs so much of our economy,” said Jeff Fromm with Barkley, a Kansas City, Missouri advertising agency.  “You have an ever connected consumer –in terms of their adoption of technology tools which enable retailers to connect with them and offer deals that only offer for a really short period of time.”

Short-sale, Long Revenue

And this success just fuels interest in sites like Fab.com, which recently secured a seven-figure investment from Times of India as they move in on India’s shoppers.  The investment comes after Fab acquired India-based True Sparrow, a tech venture company.

“I have been working with Satyan (Gajwani, the CEO of Times Internet) for several months now and he [has] been super impressive with his approach to innovating and growing technology businesses in India,” Fab founder and CEO Jason Goldberg wrote. “I’m excited to work with him and his team as Fab explores the India market further.”

Fab’s success is not solely based on flash deals.  The company saw that people flock to their site to not only take advantage of great flash deals but were also interested in purchasing consistently available products.  Because of this, they are open to the possibility of launching a brick and mortar store of their own, which would offer flash deals on items in addition to other great products.  No news yet as to when we can expect an actual Fab store, but they’re seriously thinking about it.

Wayfair also secured a $36.3 million investment to grow their flash sales division, Joss & Main, which focuses on home furnishings.  Participants in this round of funding are Battery Ventures, Great Hill Partners, HarbourVest and Spark Capital.  Joss & Main experience a surge in sales during Cyber Monday, about 50% than their prior highest sales day.  This increase proves that their company is worth investing on, thus the new round of funding.

“Mobile shopping represents more than one-third of sales every weekend, and reached nearly 40% on Cyber Monday,” said John Mulliken, co-founder and general manager of Joss & Main. “Mobile is growing four to five times as fast as the rest of our business, which is fast-growing itself.”

Mobile Makes it Real

Another company that also offers great flash deals for consumers is Ideeli, an early entrant to the flash sales market, but one that’s had a troubled transition to mobile.  Mobile’s a key demographic for flash sales sites like Gilt and Ideeli, as it provides push notifications and other real-time access to flash sales on the go.  To turn things around, Ideeli went to Fueled to help them redesign the app and make it more appealing to mobile shoppers .

“The updated app is not only gorgeous, it’s much more user-friendly,” said Aubryn Thompson, project manager, “and even includes a few tricks like overscroll on the product pages, for more advanced users.”

Flash sale sites should thank mobile shoppers for their success as those glued to their mobile devices such as smartphones and tablets are the ones who generate the most buys.  Gilt CEO Kevin Ryan noted recently that 60 percent of their site’s traffic came from shoppers’ iPhones and iPads and projected that 50 percent of their sales next year may actually come from mobile sales.

When Flashing Doesn’t Work

But flash sales is not for everyone, as evidenced by LuxeYard dropping flash sales from their offerings all together.  The drop in flash sales is attributed to their need to reduce operating costs, which also included slashing their staff from 60 to 15 and and eliminating several unprofitable merchandise categories.

“The ongoing shift in the company’s business model, which will focus its efforts on selling into our core competencies, especially high-end, luxury home furnishings and décor at discounted rates, will propel LuxeYard to a prominent position in the luxury e-commerce space while improving revenue and profitability,” said Amir Mireskandari, interim CEO.