Private membership sales: trend or trouble?, once an exclusive online boutique for children’s clothing, recently burned through $34m and laid off 83 employees while selling its assets to international style shop Modnique. 

Its CEO resigned in April and after several rounds of funding, Totsy still couldn’t turn a profit.

What happened here?

Totsy’s incredible growth lead to some serious growing pains

Totsy stumbled considerably along the way, first buying the email addresses of its competitors (for nearly $1m) and only achieving a 10% conversion rate with emails to subscribers. 

Furthermore, it was plagued with communication issues and shipping mishaps that caused mommy bloggers (with large followings) to leave scathing reviews about the company. 

In a sense, Totsy failed to ever stand on its own two feet.

If you can’t get something done, do it yourself

In stark contrast to Totsy, Seattle-based Zulily, a site targeted at busy moms and kids, has over 10m members and sales on track to hit $500m. 

Zulily offers limited merchandise flash-sales to busy moms, kids and babies

Zulily also experienced growing pains, to the tune of a backlog of over 300,000 products waiting to be shipped right before the upswing in the holiday shopping season. 

So it did the impossible and built its own shipping and distribution center, using the funds it raised through venture capital to beef up its production, logistics and staff.

It also invested funds in the development of a mobile app that, when launched, accounted for 30% of the site’s purchases.

Two sites, same audience, yet vastly different results.

Key lessons:

  • Don’t let customers slip through the cracks. Follow every ticket from start to finish and keep disgruntled shoppers updated on the progress of their problem through to its resolution.

    Totsy failed to do this, angering influential mommy bloggers and sending its sales into a tailspin.

  • Make mobile shopping a priority. People can, and will, buy nearly anything on their phones. Failing to develop a responsive design that looks and functions on multiple devices is just like handing your biggest competitor your most lucrative customer list.
  • Use funding wisely. There will be unexpected bumps along the path, particularly for companies that are growing faster than their shipping and distribution partners can catch up.

    Acknowledge this with your customers, ask for patience, and put funds to use improving your infrastructure rather than keeping your scattered team afloat.

Be willing to adapt, quickly

What do you do when your current online business model starts running into serious competition from brick-and-mortar businesses? You adapt. 

Online businesses have the advantage of being able to avoid much of the overhead and bureaucracy that comes with the retail world, and being able to modify on-the-fly may just save them from shutting their digital doors.

Case in point: distanced itself from flash sales to become a more centralized ecommerce shop

Fab has undergone a rebranding shift recently, as it plucks itself out of the mire of flash-sales sites and focuses on becoming more of a lifestyle shop.

With the bulk of its referral traffic stemming from social media, Fab has learned that in order to stay in the game, it needs to be willing to make the tough decisions and the uncertain choices that come with doing business in a world where technology is quickly outpacing tradition.

Will customers play the waiting game?

Contrast this with a similar site on a similar mission, Sneakpeeq:

Sneakpeeq – ETA to launch: Unknown

Sneakpeeq was a social shopping site that allowed users to sign in via Facebook, and would present them with a limited-time showcase of products. The user could then like, share (on Facebook) or buy the item directly through the site.

The problem was that Sneakpeeq restricted itself to leaning heavily on Facebook as its source of referrals rather than carving out a niche for itself and using Facebook as a supplementary marketing tool, as Fab does.

The issue is further exacerbated by the fact that Sneakpeeq is undergoing its own brand renovation by turning into the Symphony Commerce Group – with no real details on when the site will relaunch, or if it will at all.

Still, we can learn a lot from both of these examples:

Key lessons:

  • Don’t rest on your digital laurels. Selling online is no longer enough to entice people to buy. These days, shoppers demand more – more selection, more personalization and more targeted offers that fit their needs and style.

    If you don’t deliver, someone else will.

  • Be willing to change as the market dictates. The longer you’re “on hiatus”, the greater the chance your competitors will step in and scoop up your hard-earned customer base. 

    Don’t wait until it’s too late, or else you’ll be fighting twice as hard (and spending twice as much) to win back the subscribers you started with.

  • Keep customers informed. If you have to go offline to restructure your site and business model, give customers a firm launch date.

    Give them a behind-the-scenes look at what you’re doing to make their shopping experience better.

Raising the bar on ebusiness

Whether you run a flash sale site or an ecommerce store, there are some things you can do to entice customers and win their loyalty:

  • Avoid deal fatigue. More and more niche exclusivity, mystery and flash sale sites are popping up all the time. 

    Customers will get tired of deal notifications sooner rather than later. Take the time to ensure that the deals are as customized as possible to the shopper’s behavior, likes and dislikes.

  • Sell guidance, not products. has differentiated itself from the mass of women’s apparel shops by selling the look instead of the item.

    People secretly want direction and advice. They (especially women) don’t want to look foolish or out of place, and sites like DailyLook give them that kind of reassurance. How does your site do that?

  • Make it the real deal. Customers these days aren’t just shopping for deals, they want good deals. That doesn’t mean you have to dip deep into your own pockets to satisfy them. 

    Study your audience’s buying habits, preferred shopping times, and craft a flash sale campaign that has all the bases covered. Case-Mate did this, and it enjoyed a whopping 236% more revenue as a result.

What is your opinion of flash sale sites? Are they an idea whose time has finally come, or a new twist on an old offer? Share your thoughts in the comments!