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What Flash Sites Are Suggesting About Consumers

Pining for the days when consumers considered shopping a sport? Perhaps you’re looking in the wrong place.

Cyber Monday
Cyber Monday

Flash-sale sites like Gilt.com, RueLaLa.com and BeyondtheRack.com came on the scene when recession-wary consumers were hungry for bargains and still reserved about their spending. The sites took advantage of retailer overstocks to lure shoppers in with high-quality merchandise at rock-bottom prices. But now, consumers and retailers are on more solid footing, but the sites don’t appear to be losing their allure.

“The flash-sale sites are becoming an increasingly important part of Internet retailing,” said KeyBanc Capital Markets Retail Analyst Edward Yruma. “The idea of product scarcity gives consumers a real reason to shop. We think flash sites are not only showing that the consumer is still looking for a bargain, but that the recreational element of shopping may be slowly coming back.”

One sign is the range of merchandise they're selling. It doesn’t matter if it’s a $2,000 Chloe handbag, an $8 fedora, or an $80 eight-piece comforter set. The demand is there.

Rue La La CEO Ben Fischman said his shopping flash site, which has about 6 million members, is seeing a definite uptick in sales this year. Members are buying 30 percent more than last year.

“There doesn’t seem to be a huge limit in terms of what the consumer will buy right now,” Fischman said.

Market researcher ComScore shows flash-sale sites are still growing, and these sites largely attract mid-to upper-income women.

“I think it’s fair to say many of them are aspirational consumers,” said Andrew Lipsman, vice president of industry analysis at ComScore. “They have a taste for luxury, but may also look for ways to be economical about it.”

The success of the flash site banks on the luxurious lifestyle a lot of Americans were accustomed to before the recession, according to Lipsman. They give people what they want at a price that’s more affordable. And, he said it comes with an excitement factor since merchandise can sell out fast.

“I think the sense of urgency is very powerful in terms of eliciting consumer behavior. There is a good business model in these sites. They are tapping into something fundamental in terms of how humans respond to urgency and sales,” said Lipsman.

Rue La La goes live with new sales at 11 a.m. ET every day. Who’s typically logging on? The typical Rue La La shopper is a woman aged 25 years to 40 years old. At checkout, she usually spends about $125, not including a shipping fee of $9.95 that covers all purchases made on the site within a 30-day period.

The shipping offer, like the limited quantities of the merchandise, entices customers to come back and buy more before it expires.

“Everything we get is in the hundreds. It’s not about gamesmanship. It is about selling the inventory,” said Fischman. “Seeing ‘sold out’ is good for business, but it’s frustrating for members. So we try to satisfy as many members as we can by planning inventory levels as much as possible.”

The site is also cashing in on the men’s business. The typical male customer is a professional ages 30 to 35.

“Men are gobbling up the merchandise fast, if not faster, than the women’s merchandise,” said Fischman. “Our male members are frustrated we don’t offer them more. But, don’t worry. It’s coming.”

Beyond the Rack, a shopping flash site with nearly 7 million members, is also growing. Its CEO Yona Shtern said the site is attracting close to 300,000 new members every month — most are women ages 25 to 45.

The site finds three-quarters of the site’s revenue is from repeat buyers — a statistic that’s rising. On average, customers buy about $120 of merchandise when they checkout.

“The level of commitment among consumers is extraordinarily strong. Consumers are saying ‘yeah’ this is what we want,” said Shtern. “We started three and a half years ago focusing on ladies wear and accessories. We’ve added home and footwear. These are our most popular items now. We are very bullish on this.”

Questions? Comments? Email us at consumernation@cnbc.com. Follow Stephanie Landsman on Twitter @StephLandsman

Retail