Dissecting the relevance of flash sales
Amazon, Flipkart and other players in the e-commerce market hold regular flash sales, offering massive discounts and sales.
Amazon, Flipkart and other players in the e-commerce market hold regular flash sales, offering massive discounts and sales. While customers and businesses eagerly wait for this time, as it’s a win-win for both, the government has proposed banning such sales in the new draft of e-commerce rules.
The Department of Consumer Affairs had asked for comments or suggestions on the proposed amendments to Consumer Protection by July 06, 2021, but final announcement are yet to be made. Gadget accessory and consumer electronics brand UBON holds flash sales fourfive times a year on their platform apart from being a third party seller on other websites.
Mandeep Arora, Founder and Director, UBON, discloses that flash sales give the required boost to the business. "Flash sales can be the most effective way to rapidly unload surplus goods. Moreover, flash sale sites buy the commodities at further reduced prices from all stores, and sell it for a profit to the consumers. Doing this also enables online buyers to buy from a wide variety of products," he said.
While the ban may slow down sales of third party sellers, it does not incur losses, says Arora. "It will help brands to reach out to more customers and provide direct brand benefits to them through their own platforms," he adds.Representational ima
Vijeta Soni, Co-Founder & CEO, Sciative Solutions, feels the ban will impact those ecommerce companies where sales are organised fraudulently by using technological means with the intent to enable a specified seller or group of sellers managed by such an entity to sell goods or services on its platform.
"It is also observed that some large sellers have used the flash sale events to produce merchandise of inferior quality, which are then sold at unbeatable low prices, hampers the sales of all the sellers in the category, and spoils the overall market sentiments," she adds.
Sciative's BRIO, an AI-tech platform, is working directly with brands and multi-brand retailers to transform and automate their daily pricing and design customer-centric promotions and discounting strategies. "It is imperative that the flash sales and promotional decisions that are powered by AI be guided by ethical boundary conditions," adds Soni.
While the government and its agencies are doing their part in making fair play for all, the experts feel flash sales are important for the continuity of the retail sector - whether it’s brick-and-mortar or e-commerce companies, foreign or Indian retailers/ brands or small and large sellers. "Such sales not only support the sellers, but are terrific occasions for customers to purchase products which they could have otherwise not been able to afford," says Soni.
Neha Khosla, Co-Founder, Paxcom, feels flash sales have more benefits than losses. "These sales help in increasing brand loyalty and sales, boost revenue, and increase clicks up to 50 per cent on an e-commerce channel," adds Khosla, whose company helps brands strategise their promotional offers and flash sales, audits the execution of the sale, and analyses its impact on their key metrics.
He also believes that flash sales help small businesses and brands that sell their products on Amazon and Flipkart. "For a short duration of time, their business becomes highly visible to many people who might not have otherwise considered buying their products," adds Khosla.
But Tanushree Ishani Das and Pooja Karegoudar, founders of beauty and wellness brand Body Café, do not advocate frequent flash sales or aggressive sales (predatory flash sales). "A brand like ours that believes in manufacturing small batches to maintain the efficacy of the products, is left with very little margin. Plus most aggregators have a percentage charge, which they levy as commission for hosting our products on their platforms. So when we offer a sale in addition to that, we are not even breaking even."
They add that if a ban is imposed, the stock clearance will be more organic, a lot more effort will go into actual selling of the products, and real investment into tapping consumer wants and needs will come into play.
WOW Skin Science holds conventional flash sales that are planned after following a defined sales and marketing strategy. "We use data analytics and predictive analytics to decide the kind of sales we will hold. The Department of Consumer Affairs has clarified that there is no blanket ban on flash sales. Conventional flash sales are legal and e-commerce players should plan their flash sales in advance and should avoid misleading claims and pricing ads. But we will need some time to settle down with the new rules, and some level of market upheaval is expected," adds Manish Chowdhary, Co-Founder, WOW Skin Science.
Meanwhile, giants like Amazon, Flipkart, and Myntra did not respond to requests for comments. Soni feels, "Since the government has decided to give companies and stakeholders time to come forth with opinions, ecommerce giants are taking time to review the proposed rules."
IN A NUTSHELL
What is a flash sale?
A flash sale is a sale of specific products that lasts for a short period of time and can sometimes spout
deals of 50-70 per cent of regular MRP values. A flash sale offers exactly what customers are looking for, but only for a short period of time. This creates a sense of urgency and ultimately boosts sales.
Difference between conventional and predatory flash sales
Conventional flash sales are carried out by a third party. Predatory flash sales are held more aggressively and frequently. In the latter sale, one seller on a platform does not carry any inventory or order fulfilment capability but merely places a 'flash or back to back' order with another seller controlled by the platform.
This leaves customers with very little to no choice and the audience seeks discounts rather than value propositions.