Q&A with Flash Sale Insider: Tools Behind the Trend

Salim Mitha is the chief operating officer and co-founder of Wahanda, a health, beauty and wellness community and marketplace that also operates a flash sale component on its site. It was named one of ELLE magazine’s Top Ten Beauty Websites of 2009.

Wahanda connects consumers, wellness businesses and professionals across the globe through content (including providing information on spas, salons, clinics, treatments and therapists), reviews, and ultimately through transactions, bookings and commerce. The flash sale model offers a limited number of products or services for a limited time.

The company is also testing a business-to-business flash sale site model.

[Flash of Brilliance? The Flash Sale Model Takes Hold]

Prior to Wahanda, Mitha spent four years as the European director for Yahoo! Search.

BusinessNewsDaily asked him to explain the flash sales model and tell us why he thinks it’s the not necessarily the next wave of e-commerce, but rather another marketing tool for businesses.

BusinessNewsDaily: Are flash sales the future of e-commerce?

Salim Mitha: For retailers, flash sales are just one of the ways in which companies can market themselves, and ideally they should complement other sales methods.  Online flash sales sites are just the more modern equivalent of outlet malls, or the popular January sales events.

For consumers, flash sale sites are becoming increasingly popular because they’re a great way to access end-of-run items and overstocked inventory, or to get introduced to new brands.

I would not categorize flash sales as the future of e-commerce, but one of the faster growing areas and one that can benefit both companies and consumers.  Often customers will “graduate” from flash sales to normal types of commerce in which they seek out brands introduced to them in flash sales.

BND: Why are flash sale sites a more useful business model?

S.M.: I can look at this from three separate perspectives.

1. From the perspective of flash sale sites (Gilt, RueLaLa, etc.):  This is a useful business model because clearly there is a need to create an online marketplace equivalent of the outlet mall.  Companies are looking for ways to either offload overstock inventory in a more discreet and efficient manner, or to provide introductory items to gain customer traction.
2. Customers:  It’s a great way to get discounts and access brands that might otherwise be out of reach.
3. Suppliers:  Flash sales are not necessarily a more “useful” business model, but one that allows suppliers to deal more efficiently with overstock and to reach new customers.  There are very few retailers who rely only on flash sales, as they typically complement other sales and marketing activities.  Companies are wary of relying too heavily on flash sales, which can cause them to grow dependent on discount shoppers (loyal customers who buy at full price are preferable to bargain hunters). This shift may also negatively affect brands that don’t want to be seen as excessive discounters.

BND:  How do you deal with returns?

S.M.: At Wahanda, we mostly deal with flash sales on treatments and services, although we are experimenting with beauty products as well with our business-to-business flash sales.  We do not take stock of items, as they are shipped direct from the product houses.  However, we have a customer service team that helps customers who may have any issues.

BND: How do you keep customers coming back if they can't rely on you having the same inventory?

S.M.: Customers understand that the same dynamic is in effect as in outlet malls, or while buying from the sales rack – consistency of inventory is not the main driver of these types of sales, but instead it’s the thrill or potential to score a value item – a treasured, stylish or desirable item at a fantastic price.  It’s like an upscale flea market.  The motivation is different.

However, as I mentioned, flash sales often lead customers to buy from other sales channels. For instance, we offer beauty, health and wellness services through our flash MobDeals (which are available both in the U.S. and the U.K.), and those lead customers to “graduate” to our traditional shop. Customers come back because they recognize that we source, curate and merchandise great offers on desirable products from brands people know, or should know.

BND: Where do you see the flash sale business going?

S.M.: Flash sales are useful for all the reasons discussed – for consumers, suppliers and for the companies who create that marketplace.  The Internet allows for better efficiency in bringing these parties together, so I would anticipate that as long as there is excess supply of items from desirable brands, there will be a need for flash sales.

In terms of trends to look out for, it will be interesting to see if demand continues to outstrip supply, as is occurring at companies like Gilt Groupe that are now having to commission their own products as opposed to selling excess inventory.  Additionally, flash sale sites are getting more into the travel and services arena with items such as hotel stays, restaurants, spa and salon services, health, wellness, yoga and more.

Right now there is a significant amount of demand, and so companies and businesses want to be where the eyeballs and wallets are.