Discounts from Flash Sales in China I Daxue Consulting

04May2016

Flash sales in China: An Impulse Driven Shopping Experience

“Flash sale is a discount or promotion offered by an e-commerce business model which offers a single product for sale for a short period of time” (Dragan, 2013). This method provides consumers the opportunity to get a higher or more significant discounts for goods, as companies would like to maintain their optimum inventory level. Flash sale is an effective method for offloading excess inventory in which companies will have the benefit of turning a negative into a positive within a matter of hours. It would be ideal for companies to sell products on a consistent basis and matching the inventory with the needs of the customers needs may be impossible. Thus, with this method businesses have the ability to reduce their overall expenditure by clearing stock.

Additionally, items that are either out of season or have been sitting in catalogs for a long period of time will cause the company to have additional expenditure. Flash sales lead to lower operating and inventory costs on the back end as a company can sell products that have been sitting in a warehouse for a short or even long period of time, making room for newer inventory that is popular among the consumers. Flash sales offer an opportunity for businesses to increase their brand awareness. This can put your store on the radar of deal sites and blogs all over the Internet; thus, expanding your visibility in the process. “As with other popular flash-sale sites, which sell everything from high fashion apparels to hotel rooms, the idea of flash sales is to create an impulse-driven shopping experience while helping to move excess inventory sourced from a variety of vendors”.

While flash sales can be nothing more than a short-term stimulus, they offer the chance to tell customers about your other products and value proposition. For instance, a company called Zulily is a flash sales e-business website that is targeting busy moms, offering items like baby clothes and accessories at reduced price for a limited period of time.

However, with the benefits of Flash Sales, there are a few drawbacks when using this method. The margins when using this method would be small so it would only be wise to use this when trying to clear stock. Furthermore, if a business has spent a lot of money to build a strong brand image on an expensive line of products, then selling them on flash sites may give consumers the wrong impression.

Running a successful Flash Sale

According to Bigcommerce (2015), when executed correctly, e-commerce sites can leverage the benefits of running a flash sale. Below are a handful of guidelines business owners can use to have a successful flash sale:

Determine the goal of your flash sale, which, for instance, could be clearing out excess inventory or raising awareness.
Keep the sale simple. Don’t make customers jump through hoops to take advantage of the sale.
Choose a target group and tailor the flash sale to that market.
Be timely. Different target markets spend money at different times. Make sure your flash sale is as relevant as possible.
Once you’ve determined when to offer the sale, keep the time frame short. This will inspire urgency.
Make your discount stand out. A flash sale should offer significant savings compared to what customers could find elsewhere.
Promote the flash sale using marketing, social media, and SEO.
Monitor the sale and provide excellent customer service throughout the duration of the sale.
Make sure your terms of service are clear.

Flash sales in China

Sources: http://motherboard.vice.com/

This method is very popular for businesses as it allows them to clear old stock or inventory with the help of a third party (Flash Sale Site). In China, individuals visit flash sale sites with one goal in mind, to get the best deal possible. Individuals that visit flash sale sites are looking for a good bargain on goods and if a company reduce the price of the product then it is likely to sell in a large number. For new businesses, this method provides the jump-start they would need to reach a large market scale.

There are many flash sale sites that can be found in China. A few of the well-known flash sites are as follows:

According to Internet World Stats, China has ranked the highest country with the most number of Internet users followed by India and U.S.A. According to Investor’s Business Daily, the online shopping market in China’s large consumer market is growing faster than what anyone expected surpassing $300 billion. As states as Much, the overall online sales industry rivalry in China is intense with big market players such asTaobao, Tmall, Suning, and Jingdong. China’s online retail market reached 945.1 billion yuan (US$143.5 billion) with a growth rate of 45% in 2015. However, Flash Sale sites do have advantages over these rivals as they sell branded apparel and lifestyle products at 30% to 70% discount to the original retail price; Also, Much (2014) states customer loyalty, dedicated customer service, product selection and effective operational management and financial controls is another advantage popular flash sale sites have over online market platforms in China. By providing shoppers with a greater opportunity to buy featured discounted products, each customer is limited to purchasing two pieces of the same item and each shopping cart can hold only 20 items at one time, except for food products.

One of the most popular flash sale in China is Vipshop, with a slower revenue growth, the company is under increasing pressure from competitors. Customers in Tier-1 cities such as Beijing or Shanghai have similar priced products from different channels. In addition to that, Flash Sales sites have also been expanding themselves in small cities. Although the company has strong competitors, China’s e-commerce market is very large and has space.

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