A flash sale is an innovative online selling model and until The Big Billion Day, the discounted sale day of the online retailer Flipkart.com last October, which clocked a GMV (gross merchandise value) of $100 million, the term never really kicked off. But today, if you have a mobile app of Jabong, Myntra, Shopclues, Flipkart, the term ‘Flash Sale’ kicks off every now and then.
Understanding the conundrum of flash sales
If research firms are to be believed, the online retailers are able to gather as much as 5 times the traffic than any non-sale day and 10 times the sale on any given day through the sale. Not only that, the majority of the shopper populace would access the sale-day merchandise through their mobile handsets. Ganesh Subramanian, Head, New Initiatives at Myntra.com, noted, “That was actually also the main reason why we decided to go only-mobile with more than 80 per cent of the traffic coming in and around 60 per cent merchandise sales happening via the Myntra mobile app. This rises at the time of a special discounting period.”
Ever wondered where the flash sales would fit, given the new imperative of buy-anywhere-and-just-about-anytime? In 2014, the occasional bouts of shopping online rose considerably when an announcement was made: Snapdeal Savings Day, Amazon Appiness Day and Diwali Dhamaka Sale, Cyber Monday, Great Online Sale, and the more recent Super Value Days (1st and 2nd of every month) by Amazon.in, Flipkart Big App Shopping Days, so on and so forth. For Anurag Rajpal, Director and CEO, Americanswan.com, the customers would jump the moment they see a good deal, and although they would look out for convenience in shopping via the mobile app, they would want the best available deal. “Flash sales are like happy hours. We do flash sales at the time when we anticipate less traffic. This actually helps us to maintain a healthy traffic throughout the day,” he reasons out the phenomena.
Apart from driving traffic, flash sales also help online retailers with recording highest certain-period revenue and GMV. “We run monthly promos and events and one of our recent successes was a 24-hour flash sale on 25th June where we recorded our highest-ever single day revenue and GMV. We saw a massive response and good sell-through across categories. We achieved revenues of Rs 25 Lakhs and GMV of Rs. 55 Lakhs,” disclosed Rajpal.
From footwear to appliances to electronics to tour packages and even weekend getaways, everything will sell during a flash sale. Let’s take mobile phones for instance. According to the data available by manufacturers of Xiaomi phones, the first flash sale of Xiaomi Mi 4 (16 GB), which was priced at Rs, 20,000, was able to sell 25,000 units in the first 15 seconds. Going by the math, it would have sold anywhere between 14-15 crore units in a minute. The 6th flash sale of a cheaper Redmi 1s of Xiaomi helped push 1 Lakh units in less than 5 seconds.
The other side
While the number of shoppers at these sites is increasing by the day, the cash registers are amassing losses. With Snapdeal and Flipkart, two of the biggest online retailers and players in the flash sale euphoria, closing at losses worth of 719.5 crore and 270.7 crore respectively in FY14, may be the writing is on the wall.
But India being a mobile-first country, the losses of online retailers can shrink in the next two years. According to a report by Boston Consulting Group, the rural net user base will widen from 60 to 280 million in 2018, resulting in rise in the number of shoppers considerably. But, how would the rise of the net user base in the rural India help?
Hitendra Chaturvedi, whose Greendust.com is one of the country’s sought after companies in open box and refurbished items, made history too, with a limited period (flash) sale of its popular mobile phone Xiaomi. “I do not talk about numbers but we sold all the phones. In fact, it surprises me that all the units were pre-booked and around 70 per cent of the orders came from Tier III and Tier IV towns,” said the CEO and founder of GreenDust Pvt Ltd, emphasising on the impact the rise in Internet users in rural India can make to the online retailers.
Is India ready?
Flash sales are prominent and well developed in China and US, where generally a flat 80 per cent discount is offered on out-of-stock or older products. “There are some players in India following the flash sale model, but it is a less understood concept here. Flash sale is more supply driven and not demand driven. The concept came up to liquidate large inventories. In a flash sale, it’s usually the older and discountable stock that is made available. It’s a stock which is probably not in all sizes, so to dispose that off and find that long tail demand, that somebody may want older stock, flash sale is put up,” asserted Prasad Kompalli, Head (eCommerce) Myntra.
It’s a popular concept in China, given the fact that the country is hub for clothing manufacturing with a lot of apparel stock available to dispose. In India, the online retailers haven’t aggregated that value yet. Disagrees Rajpal of American Swan, “Flash sales help eCom players in bringing good traffic throughout the day and optimise their sales. This generation of customers is online 24*7. Before purchasing anything they want to see the best available deal. These customers are mostly sitting on fence and jump the moment they see a good deal. Flash sales are designed to attract these customers.”
Thus, flash sales are an effective channel for maintaining proper level of inventory and cash flow. However, the sale is not able to guarantee larger sales turnover for many online retailers. Looks like we will have to wait and watch if the Indian online retailers will travel their own path with flash sales or mirror the strategy of their counterparts in US or China.