November 18, 2013 | Written by: Paul Brody
Categorized: Marketing, Sales & Service
Online flash sales have become one of the most popular and important new marketing tools in the hands of web retailers. In customers they create a sense of urgency – with a limited time window and/or quantity: if you like it, buy now or risk losing the opportunity forever.
Offline, companies like Zara have trained customers to know that if they like something in store, they should buy it because it may not be back. Online, sites like fab.com and gilt.com have brought flash sales to clothing and fashion accessories.
Though it is not widely recognized as such, flash sales have come to the electronics industry as well. Sites like Kickstarter and electronics companies like Xiaomi are making flash sales a regular part of their business. On kickstarter, projects are time limited – order your item in the 30 day window or you may wait months longer for another opportunity – if ever. Xioami, the fast-growing Chinese phone maker, has also used time and volume limited sales to drive excitement for new model launches.
What’s not often recognized is how useful and elegant flash sales can be from a supply chain perspective. One of the most difficult things to do in an on-going business is managing replenishment and production run-rates. Managing production run rates to adjust for demand, marketing, and new product introductions is very complex, all the more so when dealing with a new product introduction with an unknown demand profile.
Flash sales get rid of all that complexity, replacing run-rate and replenishment planning with a one time buy from customers and a one-time buy for the supply chain operation as well. When the sale is done in advance of production, risk is minimized and the whole process demands no working capital. Even when done as a one-time sale post-production, complexity is minimized since anything that doesn’t sell gets marked down until it does.
Flash sales are not without risk or challenges. Successful ones often have the effect of “leaving money on the table” – demand that was unfulfilled. In electronics, plans still need to be made for repairs, service and warranty. Even so, as a means of building anticipation and simplifying supply chain complexity, they’re hard to beat.