April 30, 2012

Meanwhile, In Flash Sales News

Click here to read "Flash Sales Sites Get A Makeover".

I just talked about retail and loading up on debt to generate sales.

This is the opposite end of the spectrum.  You get the names for free, of course, so you avoid all of that debt that plagues retail.

But when you get a free name, you get the loyalty of a free name, right?

There are certain laws, laws you really cannot fight.
  • For most e-commerce based businesses, between 25% and 40% of last year's customers purchase again this year.
  • For most retailers, between 30% and 50% of last year's customers purchase again this year (for department stores, this metric is between 60% and 80%).
  • For most catalog based businesses, between 35% and 55% of last year's customers purchase again this year.  The rate is higher than in the e-commerce model because of the impact of catalog advertising on influencing customer purchases.
When your flash sales business is growing by 92% a year, you don't see the impact of loyalty (measured via 12-month repurchase rates) ... all you care about is obtaining names.

But once customer acquisition dries up (and it always dries up, folks), you're stuck with a 25% to 40% annual repurchase rate, and not enough new customers to make up for marginal annual repurchase rates.

Just something to pay attention to ... each business model has strengths and weaknesses ... few people talk about what the inherent strengths and weaknesses truly are.