The Curious Case Of The Flash Sale
What do the horses in the Xiaomi stable, notably the Mi 3, Mi 4, Redmi 1S, Redmi 2 & Redmi Note 4G have in common with the YU Yureka or the Micromax Canvas Spark, or even the Lenovo A6000 and the A7000?
For starters, the mentioned phones are amongst the more value centric Android smartphones, aiming to offer a better deal in terms of specifications and an overall package, than their domestic and foreign competitors in the Indian market. What sets them apart from the rest of the crowd though, is the seemingly less obvious fact that all of these smartphones employed, rather successfully, a non traditional form of marketing: Flash Sales.
What is a flash sale?
Cambridge Online Dictionary defines a flash sale as “a very short period of time when a store sells products at much lower prices than usual“. Extending this definition on to the e-commerce scene, a flash sale would be when the Indian e-tailing giants like Flipkart, Amazon or Snapdeal offer a range of their products at lower than usual prices. Seeing that they already claim to offer the best prices on a regular basis, the conventional definition of a flash sale does not stick in this case.
In this sense, a flash sale would refer to the sales of a product for a very short period, but at a very demand-centric price. All of the products that usually opt for flash sales are products for which the company forecasts a strong demand, considering its price or more importantly, its price-to-value ratio.
Most flash sales are held with a gap of at least one week for the same smartphone model. Almost all flash sales, however have users ending up in frustration as devices are sold out too quick for human reaction.
So what makes manufacturers opt for flash sales instead of going for the traditional, open-sales model?
Let us take an analysis of some of the popular smartphones which were sold under the flash sale methods, as per the data made available by the respective manufacturer post the flash sale:
For the sake of easy comparison, we will average out the time for every 10,000 units sold. The Xiaomi Mi 3 took around 1.22 seconds for every 10,000 units sold, while the Mi 4 16GB took 6 seconds.
As can be seen as a general trend from the limited data available, the cheaper device tends to benefit more from the flash sales model. Coupled with adequate marketing and hype, the lesser priced, but more value-for-price devices perform in a more consistent manner than higher priced devices in the flash sales model. Of course, you don’t have to take my word for it, so instead, take a look at some more data on the sub-Rs. 10,000 devices.
The Xiaomi Redmi 1S took 1.1 seconds to sell out 10,000 devices; while the comparatively expensive Lenovo A6000 took 1.42 seconds to sell 10,000 devices, which is less than the 17.4 seconds it took the Xiaomi Redmi 2 to sell those many devices in its first sale.
Moving on to the Lenovo A7000, it sold 10,000 units in 1.33 seconds, while the YU Yureka took an average of 2.6 seconds to sell those many units.
As a general trend, it can be said that the Indian market is very value-sensitive. Users here tend to gravitate to the product which offers the most value for its money, but unlike foreign counterparts, the demand for the product is sustained over a long period of time irrespective of its supply situation. Marketing, hype and advertising are also involved in this, making it a very complex situation.
The sustained demand for the product makes sure that all the units that the company has in inventory is sold out. In this regard, it is similar to the invite-only system that OnePlus employed until recently, which gave them granular control over the products produced and products actually sold. The smaller inventory size enables these companies to survive on smaller capital requirements than the giants like Samsung and HTC. This in turn helps bring down cost requirements as it leads to quick turnover and less blockage of funds in the form of unsold units.
In low-end devices, a reduction in cost would enable the company to put more pressure on the competition by way of discounts, deals and more advertisement. Companies can create a situation of higher demand and non-existent supply, creating an aura of exclusivity on devices which can easily fit into tight budgets. This pretty much creates a cycle of marketing where the hype builds on the phones performance, value and exclusivity.
But what happens when the demand wanes off?
Flash sales heavily depends on the forecast for demand. If the demand for the smartphone is not expected to be high, then putting users through the taxing routine of a flash sale will destroy whatever little demand that remains. The phone may not pick up any ground at all, as its “exclusivity” becomes its own choking point. This is a gamble which is taken after extensive market research with regards to consumer expectations and competitor offerings.
There will eventually be a point where the demand will decline as part of the natural product cycle. At this point the stock (i.e. the supply) will be sufficient to meet the waning demands, and it would naturally make more sense for the company to capitalize on the phone’s past popularity by opening up the supply and getting rid of flash sales. This can be seen from the examples of Xiaomi and OnePlus, both of which have removed the exclusive supply restrictions as their products matured.
So, are flash sales good for all products?
Business is a gamble by itself, and a flash sale would amplify the risks on products which are not advertised and built up heavily. The key factor in the success of a phone in this model of sales would be its hype and value for money. Extending the flash sales models on to all devices would be wrong, as this is certainly not a case of one-size-fits-all.
However, as proven by previous successes, it certainly works for low-price, high-value products. This can extended be smartphones across price ranges, say for example, the Nexus 5 2015. If at all Google decides to take another go at creating a mid-sized Nexus with top-notch hardware and a kicker price (like the erstwhile Nexus 5), it can employ the flash sales model. The Nexus 5 had been frequently in and out of stock, essentially creating a flash-sale like situation of its own making. Unless Google plans to ramp up supply, it can look into marketing it as a flash sale product by building up on the products hype and exclusivity. If the flash sales fail, there’s always the option to open up the supply.
Flash sales are a really effective tool in controlling supply and maintaining proper levels of inventory and cash flow. Using them on hyped products can translate into larger sales turnover, but it comes at the cost of decent failure risks and consumer frustration in case of success. Judging from the current scenario, we don’t see this marketing model change in the near future, in the Indian entry-level market at least.
What are your opinions on flash sales? Do you absolutely hate them as consumer, or do you see them as smart business decisions? Let us know in the comments below!
Data Courtesy: NDTV Gadgets