Last week, a housewares store opened its first Boston outpost on a quiet, brick-lined street in Fort Point, offering a selection of framed Nantucket prints, farmhouse chic tables, and blue-and-white chinoiserie. A certain kind of sharp-eyed bargain hunter with upscale taste will recognize the store’s name, but it might seem out of context.
A decade ago, One Kings Lane was a daily deal site selling posh housewares at low prices. In its heyday, when it had 600 employees and a valuation of more than $800 million, it unleashed a blizzard of Facebook ads and e-mails to help promote its fleeting sales.
Now, however, the flash sale era has passed, and the company is recasting itself as the very thing it had set out to disrupt: a brick-and-mortar housewares store. It’s among a handful of companies with flash-sale DNA striving to become more than virtual peddlers of short-term deals.
“We’ve fully morphed into a full-fledged aggregator of full-priced home products,” said Jim Hardy, the brand’s vice president for omni-channel retail, as he surveyed the floor of the store last week. “The flash sale stuff is long behind us.”
A decade ago, when the United States was deep in the throes of the Great Recession, the daily deal concept seemed to many retailers like a bright flashing light at the end of the tunnel.
Seemingly overnight, sites like Boston-based Rue La La, Gilt Groupe, Zulily, and One Kings Lane emerged online, each selling a get-it-while-it-lasts selection of deeply discounted luxury goods, housewares, and other coveted products.
The sites were a perfect solution for lean times: High-end brands could unload unsold merchandise without devaluing their clout. Customers responded to flash site bargains with the fervor of brides-to-be at a Filene’s Basement wedding dress sale.
“The sites tapped into that sense of FOMO” or fear of missing out, said Lauren Beitelspacher, a marketing professor at Babson College. “There was a psychological component of telling people there was only so many left and so much time left in a sale.” Within a few years, several of the largest flash sites had billion-dollar valuations.
But as the economy recovered, and the flash flood of excess merchandise dried up, many of the sites began to pivot away from discounts, or were acquired by larger retail players. Others, like Fab.com, burned through cash and imploded.
Sucharita Kodali, a retail analyst at Forrester Research, said the proliferation of sale sites ultimately left customers jaded — eventually, the sites all began to offer the same brands and stopped feeling special.
“While shoppers loved them, the truth is that [flash sale sites] struggled to get great brands and enough volume of compelling product,” she said.
And the operating costs of storing inventory, plus photographing and writing up the copy for the merchandise were a drain on profits. “The customer acquisition and retention costs for these types of companies got larger and larger,” she said.
Shortly after it was bought by Bed Bath & Beyond three years ago, for just under $12 million, One Kings Lane ended its flash sales. Today, the company operates three brick-and-mortar stores — in Boston, Southampton, N.Y., and New York City. Hardy said its digital roots influence its current selection; as he toured the store, he touted the brand’s in-house design services and its ability to let shoppers customize the color, size, and scale of its upholstery offerings.
“Pun intended, it was a flash, and a moment in time,” Hardy said. “This country went through a real severe economic downturn, and a lot of things had to be done differently. Even if the flash model was still viable, I think we would have pursued this because this is even better.”
Some e-commerce brands are still pursuing the flash model, but they’re are also developing partnerships on the ground.
Boston-based Rue La La acquired its longtime flash-sale nemesis Gilt last year from its previous owner, Canadian retailer Hudson’s Bay Co., owner of Saks Fifth Avenue. Mark McWeeny, chief executive of the merged Rue Gilt Groupe, said both sites are thriving and the company is profitable. But earlier this month the company moved beyond flash sales, announcing a $280 million cash investment from Simon Property Group, the multi-billion-dollar shopping mall developer that owns Copley Place, Burlington Mall, and South Shore Plaza. The Rue Gilt Groupe now runs Simon’s online portfolio of outlet stores on a new site, ShopPremiumOutlets.com.
While off-price retailers like T.J. Maxx are thriving thanks to the “treasure hunts” they offer shoppers in physical stores, their Web presence is weak, McWeeny said. Rue and Simon independently saw an opportunity to build an online “collection of the best brands for everything on sale and off-price.”
“We both had the same vision. There’s a void in the space for this,” he said.
Shoppers on the new site can find Chloe trenches from Saks Off 5th and open-toe booties from Cole Haan’s outlet all in one place. And the mall empire is a powerful ally, he said, with $90 billion in gross sales, 15 million e-mail subscribers, and a $100 million annual marketing budget.
Surviving flash sites are also going on the offensive and positioning themselves to compete outside of their niche. Earlier this month, Seattle-based Zulily, which is owned by QVC’s parent company Qurate Retail Group, announced it was going head-to-head with e-commerce giants Amazon and Walmart.com on pricing this holiday season.
Shoppers tend to seek out Amazon and Walmart with a specific product in mind; Zulily hopes to position itself as an equally competitive destination for great bargains on major brands. The site now features price comparisons to prove to its customers that its 72-hour sales are far cheaper than those online megaliths.
According to the company’s internal data, Zulily’s prices beat Amazon’s and Walmart’s prices 97 percent of the time, said the company’s chief executive Jeff Yurcisin. Zulily’s supply chain puts less emphasis on fast deliveries by bundling orders to cut down on shipping and transportation costs.
“Our hope is more customers realize that there are millions to be saved this holiday season if they have patience,” he said.
Rue Gilt Groupe and Zulily executives said their flash sites are evolving alongside the modern shopper. Both companies now see more than 70 percent of their sales on mobile phones and expect that to only increase over time.
“Our customer doesn’t go shopping,” McWeeny said. “She’s always shopping.”