Insight from Parody: Private-Sale & Group-Buy Sites

It’s a week or so late for April Fools, but social commerce hype around group-buy and private-sale sites has spawned several parody sites…

At group-buy site nopuorg.com (groupon spelt backwards) you can get 75% off unlimited trampolining, 79% off Finger and Things spa treatments, and half price dating venues.  The deals are syndicated directly to Flitter and Yearbook.

Founded by Mason Andrews, but registered to Andrew Mason (Groupon founder ;)), the design of the (self-)parody site puts many of the replicating Group-Buy clones to shame.

At private-sale site GuiltyLook.com members can participate in exclusive flash sales of… private sale sites such as Gilt, HauteLook, RueLaLa and Ideeli at incredible member-only prices.

The mind behind GuiltyLook is Bob Schwartz, experienced e-commerce expert, and from the site Schwartz offers a useful overview and analysis of the Private-Sale market. In brief, this is what Schwartz has to say on the Online Private Sale / Flash Sale  market:

The Business Concept: Private Sale sites bring the powerful aspects of the sample/flash sale on-line.

The Value to Customers: Excitement of screaming great deals plus limited inventory only available for a short time period with exclusive access.

The Value to Brands: Ffast way to liquidate excess inventory in a very short time plus a “closed membership environment” giving brands a level of “plausible deniability” they need (”it could be a safe discounting venue”).

The Opportunity for Startups: Proven business model, established success stories (e.g. Vente-Privée), simple and inexpensive technology (opensource Magento has a private sales module).

The Winning Strategy: Grow your Private Sale business by building a brand into a leading discount retailer brand.

The Market Structure: three tiers of players.

• Tier 1 (Large (1M+ monthly visits)) Gilt, HauteLook, RueLaLa, Ideeli, BeyondTheRack
• Tier 2 (Medium (200K monthly visits)) OneKingsLane, EditorsCloset, BillionDollarBabes, TheTopSecret
• Tier 3 (Small (100K monthly visits)) Totsy, Swirl (by DailyCandy), JackThreads, TheMiniSocial, TheFairest (Hiatus)

The Challenges:

• Beyond Waste Management: The Private Sale market lives off poor inventory management, selling overstock items – but manufacturer and retailer inventory management is getting better… Traditional retail has responded with MFO (made for outlet) goods – but this may not work for private sales.
• Future-Proofing for Good Times: The Private Sale business has worked well in recessionary times with budget-conscious customers – will the appeal remain when the good times return.
• Keeping Private Private:  The Private in Private sales allows brands to discount goods without eroding brand value – or at least provides plausible deniability that it does so.  But it is on private sale business interest to make private sales ever-less private to sell more.  Will this conflict of interest end the ‘suspension of disbelief‘ that you can discount without diminishing brand value?
• Working With, Not Against: The paymaster of the manufacturer is the traditional retailer chain; upsetting the hand that feeds you by opening up a parallel private sale channel is not smart.  Private sale businesses need to work out how to work with traditional retail, not against it.