A friend lost his phone some days ago and needed a replacement right away. He was in luck because one of the phones he had had his eyes on, was going to have a flash sale that very day. He logged into the website at 1:55 PM, five minutes ahead of the sale, and filled in every detail required. But at 2:01 PM on the clock, he had a look of disappointment which said that he didn't get the phone.
Of late, flash sales have become a sore spot with phone buyers. And, phone companies such as Xiaomi, which are known for their flash sales, have been at the receiving end of a lot of negative feedback. But, before we look at the pros and cons of flash sales, a little bit of background.
What are flash sales?
Flash sales are held by a company to sell a limited stock of a product at a given time. Imagine, for instance, a store selling 10000 phones at exactly 2 PM on a given date. Only the first 10000 customers who visit the store will get the product. When all of this happens online, the stock can get sold out in matter of seconds.
How do people participate in the flash sales?
Usually, for smartphone flash sales, you have to pre-register yourself on the specified website. After the registration, you have to login to that website at the given time and date of the sale. Then you have to add the phone to your shopping cart and try and check out as soon as possible.
Why are companies doing it?
Smartphone makers say that flash sales are held to gauge the market through the registration process and the speed of the sale. Many manufacturers may not have a phone manufacturing unit in a country so they prefer this model, where they can bring in phones in one lot and sell them in a few seconds. That way there is no stock overhead and the storage cost is less too.
Xiaomi started the trend of flash sales in India. The Mi phones made by the Chinese manufacturer have found great success in India, with their excellent combination of hardware and software. Other phone makers, such as LeEco, Yu and Zuk, also followed suit with their own flash sales. However, of late the Xiaomi's stock has gone down a few notches because of the unavailability of their phones.
"From the vendor’s perspective, the flash sales help them to understand and estimate the demand for the product and also to plan their inventory accordingly. However, from the consumer’s end, although it creates an initial excitement and desirability, it gets a little annoying later as the customer will have to wait for a couple of days or weeks for next flash sale," said Karthik J, senior analyst at IDC India.
What is wrong with this model?
As a consumer, it is annoying to have to wait for a phone for a couple of weeks when one's chances of getting that phone are slim even after the wait. Consumers are willing to wait for a few days for the launch of a new phone, but when the space between two flash sales of a new product is, say, two weeks they are not willing to wait, given the lack of surety in securing the phone during the flash sale.
Now, the phone market has exploded and new phones are being launched almost everyday. In this competitive environment, it is tough to hold the customer's attention. And if a potential buyer turns back from a brand, it is unlikely that he or she will come back.
"Customers are getting restless and want to make a quick purchase of the phone, and get their hands on them at the earliest," said Karthik. "With competition getting intense in the smartphone market, there is a high possibility that customer would prefer alternative options than waiting for next flash sale to happen. Vendors are aware of market scenarios and are reconsidering the flash sale model."
What are the companies doing with it?
There is a war going on in the smartphone market, with companies looking to sell as many mobiles as possible. Many have moved offline to leverage more sales in India. Offline sales work more in India as many here still do not have access to the internet or the means to pay online and get the phone delivered to a particular address.
Vivo already has a great presence offline and LeEco announced recently that the they will soon be opening offline stores in India. Yu will be selling their newest offering, the Yunicorn in retails stores from July. Reports also suggest that other companies are considering the same sales strategy given that offline sales also give them a larger share of revenues.
In another recent testimony to offline sales, Reliance launched their LYF phones in stores as well as online and are now the 5th biggest smartphone sellers in India.
"The reach of the offline channel is widespread, which will cater to a larger audience as compared to e-commerce channels currently," said Karthik.
The flash sales are a great way to give smartphone sales a starting push. Some companies have started open sales without prior registrations but that doesn't solve the problem of phones being sold out quickly. Once a company familiarises itself with the local market, it makes sense to move on to other sales avenues.