'Flash sales' sites outpace e-commerce over holidays
* Gilt holiday sales up about 30 percent - exec
* Rue La La, HauteLook holiday sales growth approached 50 pct - execs
* 'Flash sales' catch on as a way to shop - analysts
By Alistair Barr
SAN FRANCISCO, Jan 9 (Reuters) - Holiday business on e-commerce websites specializing in limited-time or "flash" sales grew at least twice as fast as for other online merchants, according to industry executives and analysts.
Sales at Gilt Groupe, the U.S. market leader, grew about 30 percent over Nov. 22 to Dec. 19, compared to the same period in 2011, according to President Andy Page.
Rue La La, part owned by eBay Inc, and HauteLook, owned by Nordstrom Inc, generated year-over-year sales growth approaching 50 percent in the fourth quarter, executives at those businesses said.
That compares with overall e-commerce growth of 14 percent this holiday, according to comScore Inc. The web-tracking firm had expected 16 percent growth, but blamed weakness later in the season on prolonged "fiscal cliff" negotiations, which sapped consumer confidence.
"The macro conclusion from comScore was that things were weak after Thanksgiving, but we had our best week ever the week after Thanksgiving," said Doug Mack, chief executive of One Kings Lane, a flash sales site specializing in furniture and other home goods.
Sales doubled to about $200 million in 2012 and fourth-quarter revenue rose 25 percent from the third quarter, in a sector not usually considered by holiday shoppers, Mack added.
These businesses made a splash after the 2008 financial crisis, led by Gilt, offering high-end fashion brands at big discounts in limited-time sales events.
After an initial period of searing growth, interest waned as investors questioned if the business model could run profitably at larger scale.
But strong sales growth in the latest holiday season - and profits at some of the larger players - suggest flash sales have become established in the retail industry, according to analysts, investors and executives.
"It lost a lot of its glamour and caused people to worry about the sustainability of the model, but it has managed to hang on," said Yoni Yadgaran, an analyst at Wedbush Securities. "It's reached an equilibrium and the largest survivors are benefiting."
If the sector can maintain its secret sauce - unique products and a sense of urgency through limited-time sales or limited availability - it is here to stay, he added.
OVER $2 BILLION
The top U.S. flash sales merchants, including Gilt, Rue La La, HauteLook and MYHABIT, generated more than $2 billion in 2012 sales, according to IBISWorld estimates.
Total retail e-commerce reached $186.2 billion in the United States in 2012, comScore estimated.
"Continued growth of the flash sale category has made it much more mainstream than it was about four years ago when we all started," said Greg Bettinelli, chief marketing officer at HauteLook. "It's a much more accepted way to shop, and even the preferred way for some people to shop."
IBISWorld's estimate includes Beyond the Rack, a Montreal-based flash sales company that also sells in the United States. It saw 2012 sales climb more than 50 percent and is profitable now, according to board member and investor Shahan Soghikian of Panorama Capital.
Gilt and Rue La La are also generating profits, according to executives at the companies. Bettinelli said HauteLook is "very comfortable with where we are on profitability," but declined to comment further.
"Rue La La saw a profitable fourth quarter and profit will continue through 2013," Rue La La CEO Ben Fishman said. "The space is here to stay, the business model works and it's now about making sure we are innovating and executing."
Amazon.com Inc, which started MYHABIT in 2011, declined to comment on the business' performance.
The rise of mobile shoppers, hunting for holiday purchases with smartphones and tablet computers, fueled much of the rapid sales growth of flash sales sites.
This holiday, more than half of HauteLook's Internet traffic and about 40 percent of its sales came from mobile devices - more than double the same period last year, according to Bettinelli.
"Mobile is a wonderful platform for flash sites due to their time-sensitive sales and limited quantity items," said IBISWorld senior analyst Nikoleta Panteva. "If a shopper can hop on a site as soon as sales start, he or she is more likely to snag a coveted item than if they were to wait to get to a physical computer."
Zulily, a flash sales site focused on products for kids and mothers, saw unit sales double during its holiday season, compared to last year. The percentage of mobile orders grew over 50 percent for the season compared to the rest of 2012, the company added. A spokeswoman declined to disclose more specific numbers.
Fab, which specializes in modern design products, said fourth-quarter revenue surged 400 percent to about $60 million. One third of sales came from mobile devices, it added.
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