Will we ever shop full price again?

EditorsOct 18, 2010

Will we ever shop full price again?

(Editor's Note: this blog post was written and provided to us by Cindy Edelstein, widely know as the Jewelry Business Guru. Cindy also posted it on her own blog site, http://jewelrybusinessguru.typepad.com/blog/, where she blogs regularly.) Will we ever shop full...

WSWhitney Sielaff wsielaff@nationaljeweler.com

Will we ever shop full price again? Online flash sales, sample sales, group couponing and more are changing the retail landscape

By Cindy Edelstein

[warning! this is a LONG post but it contains a ton of info and links]

I just have to ask -- does anyone pay full retail anymore?

I'm a long time discount hunter; I've stood in line for NYC sample sales, regularly visit TJMaxx/Daffy's/Century 21 and once endured a dozen cab rides around Hong Kong and Kowloon just to visit each Donna Karan factory outlet when I heard there was more than one!

But I schlepp no longer, of course, now that I've got an internet connection.

First there was searching designer labels on ebay. Then the odd discount code and web-only sales. And then in Nov. 2007 Gilt.com was born. Credited with being the first members-only online sample sale (or Flash Sale) site --- it was modeled after the French site Vente-Privee.com -- within six months there were a handful of competitors, like:

Rulelala.com

Ideeli.com -- offers fashion, accessories and travel and brilliantly partners with other entities like Bravo TV's "Launch My Line", Mercedes Benz NY Fashion Week and coming soon, The O Shop -- a section of the site that is curated by the experts at O, the Oprah Magazine. ["And if getting your hands on finds from O, the Oprah Magazine, wasn’t enticing enough," says their blog, "if you spend more than $200 at the O Shop, you’ll receive a $50 ideeli credit to spend anywhere on the site. You don’t have to rack up the $200 on the O Shop all in one day – you can keep returning while it’s open for 2 weeks to earn the credit."]

Beyondtherack.com

HauteLook.com

EditorsCloset.com

BillionDollarBabes.com

Modnique.com

Swirl by DailyCandy ~ showcases just emerging fashion designers

DDPush.com ~ has an LA-centric slant on designers

gomattaGirls.com ~ wins for oddest marketing ploy: Mafia girlfriend chic!?

These sites all sell luxury and/or fashion goods at discounted, closeout pricing.

And of course a good trend begets more ---

RowNine.com is very jewelry heavy -- thanks to the parent company, jewelry e-tailer lussori.com which also runs vialuxe.com

Banner will be right here …

-- with a few other luxury items sprinkled in.

Totsy.com for kidswear

Zuilily.com for babies and kids

OneKingsLane.com for housewares

SnappyTuna.com for kitchenware

Bulx.com for furniture and high-end home improvement items (!)

beautystory.com for beauty products

Reebonz.com for European fashion and furnishings (it's an overseas company yet they ship to US free but includes VAT in the checkout)

LuxuryHut.com (Canadian but has US distribution center so it's no matter)

Jetsetter.com for travel deals (a division of Gilt.com)

JackThreads.com for street/skate fashions (mostly male)

Biva.com offers mostly fragrances and accessories

BBOSPrivateSale.com which is the flash site for new and previously owned luxe items from Bag, Borrow or Steal (now called Avelle.com) which still offers "luxury goods for rent" -- a concept that has come and gone.

and the list goes on..........

Gilt.com has since branched out and now offers men's, home, chlidren and travel deals along with the womens' fashion and accessories. It's undoubted that more innovation will be coming; Jason Binn, publisher of Niche Media LLC which publishes Hamptons, Vegas, Apsen, Wynn and Gotham magazines to name a few announced in early September that he is joining Gilt as Chief Advisor. Hmmmmmm.

All of these sites require [free] membership and often it's only by referral -- although I've seen ads for many of them. They alert members to new sales via email only keeping brand names out of the search engines. The top sites have between 1.5 and 2.5 million members. That's a powerful customer base for limited quantity designer closeouts.

"Discovery-based shopping is what excites the customer,'' says Adam Bernhard, chief executive of Hautelook.com, which is based in L.A, in a recent article in the herald-review.com.

"We remerchandize our (online) store every night, and every morning you have an e-mail with eight or 10 new brands. Shoppers come for no other reason than to look and all of a sudden they've made a purchase.''

This new way of shopping was born of the recession, when entrepreneurs recognized that manufacturers would need a place to discreetly sell excess inventory.

Rather than ditching high-end handbags and runway apparel at bargain-basement, bricks-and-mortar retailers - where they might stay on the floor for months and tarnish a brand's image - manufacturers and designers can turn to the private flash sale sites. Here, discounted merchandise is hidden from search engines, sells out quickly and is seen only by "members'' who have signed up to participate, or buyers who've been referred by a member.

"The perfect storm of the recession put wind in the sails of these entrepreneurs because they had access to an excess of merchandise they never would have had, and manufacturers who never would have considered a sale online were left with their pants down,'' says Sucharita Mulpuru, e-commerce analyst for Forrester Research in this article.

[read the full article, Online flash sales attract bargain hunters to Web By BOOTH MOORE - McClatchy Tribune Writer.]

The flash sale trend dovetails with -- and came after, I believe -- the one-deal-a-day sites like our ultimate favorite Woot.com with the best copywriting of any site. We visit just to get a laugh from the product descriptions since I'm not often in the market for a good tech deal. And Woot.com begat kids.woot, shirt.woot, sellout.woot and perhaps the most useful of all .... wine.woot!

The list of Deal-a-Day sites is too long for here... check out DODtracker.com to see nearly 100 sites of this type. Seems like every industry and market segment has at least one or two to call it's own.

Several focus just on jewelry like DiamondShark.com, SparkleCartel.com, ohLoot.com, blingDaily.com and the upcoming JewelryClique.com.

AFTER FLASH SALES:

Another spin on these designer deals is the bidding sites that let you "win" designer bags, jewels and department store gift cards with bids you purchase from the site. It definitely took me a moment or five to catch on here. At first I thought the site was about the bags. But then I realized they were all about the bids.

The business model of these sites is based on the purchasing of the bids. Like raffle tickets in a "Chinese Auction." That's where their profit is -- at first I thought it was the sale of the products. Silly me. But for the customer, you can get a $500 purse for say, $100-$200 in bid "tickets" so it's still a good deal.

But the action is way different than an ebay auction and you can get caught up in the adrenaline of the last 10 seconds of bidding. In fact, the sites call it bidding entertainment (code word for gambling) and you have to be over 18 to join some (and not from Florida who's residents are prohibited from such sites!). Frankly, it was too nerve-wracking for me and I'm a good ebayer!

I was a bid-virgin when an invitation to the newly launched LuxeWin.com came in my inbox -- it was so new that the competition was low and I easily won a $500 Michael Kors purse for .24¢ with just one of my five free bids. The next auction is when I understood the game about buying more bids since my starter pack had run out. And I quickly learned how fast the bidding can go in the last minute when it resets every 10 seconds with each new bid.

Next I came across OohiLove.com, FashionBay.com and bidcactus.com (which isn't fashion or luxury specific). And then I remembered that I've seen Bidz.com before but it never attracted me since it seemed so unfashionable.

A little research and I learned there is a whole world of "penny auction sites" as they're called. High fashion & luxury is just the latest industry to jump in where electronics, mass market jewels and gift cards seem to reign. I found the site PennyAuctionScam.com which is very educational; it's important to know the good from the bad, and to see the very long list of sites they list. Wow.

NOW BRING YOUR FRIENDS ALONG:

This year came the boom of group coupon-ing sites. First I saw Groupon.com (launched late 2008 in Chicago and went national last year) and thought it was so clever. And before I even got to the "-ver" in "clever" I received invitations to ShopWithMe.com, Bloomspot.com and Livingsocial.com.

These give you deals from local businesses in major cities/markets and are mostly local services like restaurants, salons, spas and the like. A few times I've seen a deal on an e-tailer like shutterfly.

Along with the daily deal email format, most feature witty copy, bright design, integration with Twitter and Facebook, ample quotes from Yelp or Zagat reviews, a big click-to-buy button and a countdown clock. It's a cross between deal-a-days like Woot.com and witty, informative city e-newsletters like DailyCandy and Thrillist.

The business model for these kinds of sites is that they count on enough folks coming in on the deal -- typically, X amount of dollars for a product or an experience like dinner at a restaurant --to make it still profitable for them because of volume sales. Once critical mass is reached they award the coupons to those who ordered them. I wasn't able to determine if they ever miss the number and don't deliver the deal.

Is it a good deal for retailers?

Julie Anne Mossler, spokesperson for Groupon was quoted in a recent Denver Post article as saying: Groupon doesn't promise merchants they'll make money through Groupon. Instead, the site encourages merchants to seek other ways to retain these new customers.

"We deliver this influx of new customers, but once they come through your doors, it's up to you to figure out how to offer a great experience so they return," she said.

Read more of this article: Get group discounts while the trend lasts - The Denver Post

And then I found the alert aggregator Flockmaster.com to manage the onslaught. And learned of several OTHER players in this city-based group coupon craze.

For the record they are:

DealOn.com (this one is slightly different in that you should promote it to your friends and help drive down the price so that the actual winning bid could be less than what you started with)

MySimon.com

Adility.com

theDealist.com

Homerun.com (this one's unique selling point comes from credits and points earned with your purchases)

And new in the 3rd quarter of 2010 Yelp has quietly rolled out Yelp Deals in a few cities.

Join all these group coupon sites and you may never pay full price for a burger, pilates class or organic facial ever again. At least that's what the "Groupawn" Josh Stevens is trying to do as documented by his blog liveoffgroupon.com.

For the retailer, there's the risk of too much of a good thing. Retailers can get so many new customers with a Groupon that it can rock their world for the worse with an overabundance of sales for one particular service or offering.

According to a recent MSNBC.com article:

Local shops nationwide are pulling in thousands of new customers with group coupons online, but the deals can sometimes work too well, turning marketing into a game of retail roulette.

"If you're prepared, it can be a really great thing," says Tony Gordon, who offered coupons for half-price massages through Groupon.com in December. "If you haven't used your foresight or you haven't extrapolated what's going to occur, it could kill your business.

read full article here.

And a similar one in the Miami Hearld, here.

Ironically as I was finishing this blog post I saw my latest Gilt.com email and at the top it welcomed me to GiltCity.com --- "delivering exclusive local offers at insider prices." On first glance it's clear this one is special -- most of the deals are at a higher level of NYC establishments than I have seen mentioned in any of the other sites. Sushi making and Sake tasting at Nobu anyone?

SO WHAT DOES THIS MEAN FOR THE JEWELRY INDUSTRY?

While Jewelry brands have embraced the flash sale sites to unload dead inventory -- although a goodly portion of the product on Gilt.com (and surely others) is created specifically for them now as brands trade margin for exposure to the millions of fashionista members -- it has been to the chagrin of many traditional retailers.

To their credit the flash sales are not search engine optimized and they protect the brand names from appearing in online searches. You have to be a member of the sites to get the emails alerting consumers that Stephen Dweck or Kwiat or Judith Ripka is offering last season's goods on Gilt/Ruelala/RowNine.

But of course there's no keeping a good secret online and some bloggers have made a business out of "outing" the private sales! My favorite deal hunters are SampleSaleSites.com and SheFinds.com.

The sales last just 2-3 days and most of the designers I've watched do it just once or twice a year.

I understand retailers feeling threatened but overall I wonder just how much business they can "lose" to a temporary flash sale and just how good the exposure is for overall brand recognition and impression.

I'd like to hear from some retailers for real experiences rather than listening to conjecture and fear. We've lived through it before with QVC/HSN, designers opening their own boutiques and designers adding shopping carts to their own sites.

There's a lot of perceived threat but I'd like to know about actual damages. Or lack of it.

There are many tales to be told about sales going UP in a traditional jewelry store once the brand opened their own store or appeared on QVC with a lower-priced line. The increased exposure and awareness should help everyone.

Or, as our favorite mantra around here puts it: "A rising tide raises all boats."

Of course that's most true for those that put in the effort to work the waves, so to speak. Capitalizing on the designers' growing fame is a necessity. Working in partnership to make sure the product mix in each outlet is unique and the pricepoints don't compete is just good business.

As for the penny auctions -- I can't see any value to traditional business here. But I see no adverse affect, either.

The group couponing craze is another matter. I have neither seen nor heard about a jeweler jumping in here but the attention and exposure is definitely alluring. Last I heard (via twitter), Dan Gordon, social media guru of Samuel Gordon Jewelers in Oklahoma City was itching to test it out.

I can see increasing traffic and gaining new customers in droves. This is definitely something to look into in your market if you build the right strategy of product and timing. Let me know if you try it!

And getting back to my original question: have we lost the full retail customer forever? Has the recession given us a permanent sale sign on our doors?

Trendspotters tell us that the next luxury consumer, Gen Y, is very value driven. Not cheap, mind you, but driven to be sure that they are spending their money wisely and getting the best deal possible whether they're spending $40 or $4,000.

How will you cope with this deal-centric new economy?

I leave you with one last trendy word --- perhaps it's all in the crowd-sourcing. The ability to reach out farther beyond your usual customer base and trade a bit of margin for a lot of recognition.

Whitney Sielaff