Time for Flash Sales to Adapt or Die

By Christina Cheddar Berk, News Editor

NEW YORK (CNBC) -- Flash-sale websites such as Gilt Groupe and Ru La La were hailed as disruptors in the ecommerce space, but recently there's been a bit of a disruption in their success story, prompting some to wonder if flash-sale sites are more of a marketing gimmick than a sustainable business model.

The sector, while still growing, is being shaken up by consolidation, layoffs and slowing growth rates. Many industry analysts suspect that will continue unless flash-sale sites adapt.

Take design shopping site Fab. The company was once lumped into the "flash-sale" genre, but Fab recently revamped its website putting the spotlight firmly on features that help shoppers share information about products with friends. The new design was most noteworthy for what it didn't highlight: sales.

Fab CEO Jason Goldberg told TechCrunch that he never really thought of Fab as a flash-sale site. Still, when the site launched, it followed the typical flash sale formula: it was a members-only site that sold home décor pieces and other items for a limited time.

For Fab, the redesign was another step in the company's evolution, spokeswoman Melissa Klein told CNBC.com. But for some critics, it could be another chance to question the flash-sale business model.

"We used flash sales as a way of selling and engaging our members," Klein said. However, she explained that unlike sites like Gilt, there was never a focus on getting luxury products on the cheap and moving overstocked merchandise at Fab. Instead, Fab tried to cultivate an engaged membership who would come back to the site day after day to see the products the site featured.

"On any given day, a $5 set of animal magnets could be featured right next to a $5,000 Herman Miller chair," Klein said. She added that design is the element that links the merchandise together.

Email Fatigue

One sign that the site has achieved its goal of building dedicated fans is the fact that more of the site's traffic comes directly to the site rather than through emails that push people to the site.