Private Event Retailing: Managing Flash Sales and Satellite Commerce as a Micro-Economy

supply and demand

When Private Event Retailing (also known as Satellite Commerce, Flash sales, or simply “PER”) burst onto the eCommerce scene several years ago, there were a handful of companies (such as Gilt Group and Rue La La) that very quickly experienced tremendous success.  And while the private event model is certainly not a panacea for a company’s eCommerce woes (it’s not a great fit for many brands), it can still provide great opportunity for branded manufacturers and others hoping to sell directly to consumers with whom they already have a direct relationship.

One of the things that makes PER so appealing to eCommerce retailers is that they typically drive large volumes of sales in short periods of time.  And they’re relatively easy to pull off, provided you already have the following:

  1. A known brand with products that people want
  2. An eager set of customers you can contact directly
  3. An eCommerce site that can handle quick traffic spikes

So, let’s say you have already these three key elements in your pocket.  How do you launch a PER site that drives customer loyalty and delivers regularly increasing profits?  A good way to plan from a high level is to look at Private Event Retailing as a free-standing micro-economy.

When viewed as a micro-economy, the primary levers of PER would be a finite supply of product and an active, limited  group of customers with a general eagerness to buy.  It’s an interesting study in the short-term economics of the eCommerce world. And if the right steps are taken, this micro-economy can offer your products to consumers at the greatest possible value, while also bringing in the greatest possible profits.

The key steps are as follows:

  1. Gather real-time analytics on consumer product and price reaction at a particular private event
  2. Respond quickly to demand fluctuations in a way that can alter consumer behavior
  3. Understand the external factors driving ongoing costs associated with a private event

In the simplest terms I’ve heard it expressed, an economy is an environment in which scarce resources that have alternative uses are managed.  When viewed in this light, PER is setting up tension for resource usage along two lines: First, shoppers can always spend their money elsewhere, and Second, shoppers may be competing to buy a limited inventory of a given item.  At a high-level, this environment challenges the PER event manager to balance the cost of acquiring a purchaser with the continuing costs of stocking unsold inventory.

There are technologies available that offer real-time supply and demand responses to encourage a more active shopper environment and increase profitability, while improving other metrics such as inventory turnover. For example, consider the following scenarios:

Real-time price adjustments: A company is hosting a private event where a number of luxury items are available in limited quantity.  Data shows that customers are purchasing some items very quickly while others are not moving at all.  Using this information, prices can be lowered in real-time for slower moving items and if desired, slightly increased for faster selling items.

Dynamic bundling: During a PER event, customer traffic analytics can be used to dynamically assemble product bundles to pair items that many shoppers are already buying together.  They can also be used to add a third complementary, yet slower-selling, product to the bundle item to lower inventory and increase profits.

Timed price cuts: A great way to generate buzz is to start your event with prices at one level and then systematically reduce them as the event progresses.  Customers that want the best odds of landing a limited supply item will buy earlier at a higher price. Customers willing to wait for a lower price may benefit in the long run,  but would also run the risk of inventory running out. The timed price cuts model is reminiscent of Filene’s or Syms, and is very easy to accomplish.  Alternatively, timed price cuts could be based on available inventory, the number of active customers in the event, or any other metric that can be tracked and acted upon.

These are just a few thoughts to consider when trying to grow your company’s profitability or considering some potentially exciting changes to your eCommerce experience.  In fact, while Private Event Retailing can benefit from being managed as an isolated micro-economy, your other commerce sites may benefit from a similar approach. Which approach should you apply, you ask?  And when should you apply it?  Well, those decisions are up to you.  But the best approach you can take is to always stay on top of your analytics, when it comes to both consumer behavior and product popularity.  Either way, the key to success is to always ensure you’re always 100 percent aligned with your brand identity and values, and perhaps more importantly, your customers and their expectations.

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