October 29, 2009

Saks and Flash Discounters: A Micro Channel

The majority of the comments I get when I talk about how one might use flash business models (Gilt Groupe, Rue-La-La) are negative. Those of you who share your thoughts tell me that I don't understand how your business works, or that this style of shopping is nothing more than a short-term fad, or that your core customer isn't interested in daily unannounced clearance items at deep discounts.

On Thursday, Saks decided to jump in to the fray (article via SmartBrief via Wall St. Journal).

On Wednesday, Rue La La was sold for a paltry $350,000,000. And by the way, Rue La La promotes another micro-channel via an iPhone or iPod Touch app.

Granted, SmartBargains was part of the deal, but even if it is half of the deal, you're still looking at $175,000,000 for Rue La La. I will be the first to concede that companies have been known to dramatically overpay for a business that fails shortly thereafter. And I will also concede that mobile marketing has largely been all hype and no substance, from a commerce standpoint.

That being said, might it be worth testing your own flash sales micro-channel, just to see if it is something your customer is interested in? Just a test? You'll quickly learn, from a segmentation standpoint, who your discount-focused customers are, and that knowledge alone will help you promote your full-priced business better, won't it? And that iPhone app? That, too, is a data point that allows you to understand which customers are unlikely to respond to traditional direcxt marketing. Isn't that knowledge valuable to your business?

The world is changing.

Ok, your turn. Use the comments section to describe the reasons why this style of liquidation selling is either good or bad.

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