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The Private Flash Sales Sites Jump the Shark
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Steven Dennis, President of SageBerry Consulting–and former head of strategy and corporate marketing at Neiman Marcus, sees tempestuous times ahead for copy-cat flash sales sites. Steven Dennis, President of SageBerry…
Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.
PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.
In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”
The Fondation Cartier pour l’Art Contemparain building in Paris
Steven Dennis, President of SageBerry Consulting–and former head of strategy and corporate marketing at Neiman Marcus, sees tempestuous times ahead for copy-cat flash sales sites.
Steven Dennis, President of SageBerry Consulting—and former head of strategy and corporate marketing at Neiman Marcus, sees tempestuous times ahead for copy-cat flash sales sites.
In my previous post I wrote about my belief that the luxury off-price market was about to hit the wall, largely owing to a squeeze between a growing customer base seeking out great deals, and a diminishing supply of first quality branded merchandise. I suggested that the various players in the space were going to have to evolve their winning formulas substantially to sustain their growth.
Well this seems to be playing out with the various high-end flash-sales sites (Gilt Groupe, RueLaLa, HauteLook, Ideeli and BeyondTheRack and the myriad wanna-bees). In fact, what made these new concepts so great–and allowed them to gobble up market share–is rapidly being watered down. Whether you call this “jumping the shark” or “nuking the fridge”, it’s a cause for concern.
All these companies have grown rapidly, attracting both legions of members and significant investment capital. Their original value proposition was simple: offer well-known, high end brands at unbelievably low prices, and make them available in limited quantities during a short sale period. This was an innovative re-imagining and up-scaling of QVC–or a blatant ripoff of Europe’s Vente Privee–depending on where you sit on the cynicism scale. Regardless, during late 2008 and well into 2009, customers signed up in droves and feasted on high demand fashion brands at steep discounts. Of course the rocket fuel during this time was the substantial amount of surplus inventory that both manufacturers and retailers were desperate to turn into cash.
A review of the flash-sale sites’ offerings today reveals quite a different story than even six months ago.
The first obvious thing is the paucity of true high demand luxury brands. A recent sale on RueLaLa featured one true luxury brand (Pratesi), but also Andrew Marc, L. Spaace, Tailor Vintage and Cuddlestone. BeyondTheRack has some Gucci, Prada and Robert Cavalli–though it’s sunglasses and wallets–not ready-to-wear or handbags. The rest of their offering is Jonathan Marche, Ninety, SpyZone Exchange, CC Skye and Italgen. Not exactly household names. A check of Ideeli and Hautelook reveals the same smattering of brands you have heard of, while the rest is decidedly second tier or no-name. Gilt Groupe, on the other hand, does seem to consistently have a much broader offering of true high end and fashion brands.
The second item of note is that the discounting is not nearly as extreme as last year. And this is not surprising. Last year, when manufacturers were stuck with mountains of unsold inventory, they were often willing to sell first quality product below their production cost. Today, more and more product is not distressed, but rather made specifically to be sold in these channels; and that means the manufacturer needs a mark-up. If your product acquisition cost goes up, the retail price goes up (i.e. the lower % discount to the consumer).
The other noteworthy change is the growing mix of product that is not fashion merchandise. All these sites are starting to feature travel, wine and even bicycles. On the one hand, this is a smart growth strategy: find more things to offer to your existing clientele. For others, it smacks of desperation.
All this adds up to a model that, despite being barely two years old, is rapidly evolving and will likely look quite different by this time next year. My guess is that by then several of these sites will be gone, bought out or struggling mightily, while a short list will leverage deep customer insight and new capabilities reinvent themselves and thrive. Given that the big guys–Neiman Marcus, Saks and Nordstrom–have yet to do anything meaningful in this arena (and really why is it taking them so long?) we can only expect the competitive environment to become even more intense.
Any guesses on who will be standing tall versus who will become chum?
Steven Dennis, President, SageBerry Consulting
President
Steven Dennis is a trusted advisor on customer-centric growth strategy, marketing and retail innovation. As President of SageBerry Consulting, he applies his C-level executive experience and pioneering omni-channel work to drive growth and marketing strategy for retail, e-commerce and luxury industry clients. He shares his thought leadership in the press, as an industry speaker and through his popular blog “Zen and the Art & Science of Customer-Centricity”(www.stevenpdennis.com). Prior to founding SageBerry, Steve was Senior Vice President of Strategy, Business Development and Marketing for the Neiman Marcus Group. As a member of the Executive Committee he drove the company’s major growth initiatives, multi-channel marketing programs, loyalty strategy and customer insight and analytics agenda. Before joining Neiman Marcus, Steve held leadership positions with Sears, including Acting Chief Strategy Officer, Lands’ End acquisition integration team leader, Vice President-Multichannel Integration and VP/General Manager of a $600MM division. Earlier in his career he was with NutraSweet and the global management strategy consulting firm, Booz & Co. Steve received his MBA from the Harvard Business School and a BA from Tufts University. Steve serves on the Advisory Boards of VentureSpur, Invodo, Nectarom and Education Opens Doors. He is also active in the social innovation and philanthropy as a Partner at SVP-Dallas, where he was recently elected Board Chair-Elect..
