Flash Drive

Could This Sales Model Become the New Normal?

It’s a sales model seemingly borrowed from the TV shopping channel: limited supplies, limited time. The countdown has begun. The pressure is on.

The use of flash sales among smartphone makers has grown from a signature distribution model to a conventional one. In some countries, it’s no longer special but expected. Xiaomi can be credited with familiarising many shoppers with the concept, but the company didn’t invent it and isn’t alone in its use. Some competitors have learned to adapt. Now Asus, HTC, Lenovo, Meizu, Micromax and Nokia are among the brands selling via a deal-of-the-day technique.

Most flash sales have so far been in Asian markets like China, India and Indonesia. The model is coming West: Spanish smartphone maker BQ announced last week that it will begin selling an Ubuntu-based phone through flash sales open to Europeans. Ubuntu could be a tough sell in Europe, but BQ should get accurate demand estimates early on.

Huawei announced a European flash sale with a twist. The company’s Honor subsidiary will use a crowd-sourced approach to pricing their Holly smartphone, with the number of non-binding pre-registrations determining the final cost of the handset. The more registrations, the lower the final price.

Several sites are dedicated to this practice for all sorts of goods, but Huawei’s direct-to-consumer, variable pricing model is unusual for a handset maker. Industry competition means it takes a degree of showmanship to catch the consumer’s eye.

The use of flash sales provides some significant cost advantages for device makers. The process often requires potential buyers to pre-register their interest, supplying manufacturers with a barometer of demand. This allows accurate estimates for their logistics teams, driving supply chain efficiencies — there’s little or no need for warehousing when devices go from the assembly line to the consumer. The model drives down costs and average selling prices.

Flash sales are helpful in creating a buzz. They’re often covered by mainstream news sites, providing free marketing, and what could be regarded as artificial scarcity or poor forecasting often helps to drive follow-up press (see Daily Insight: Playing Hard to Get). Batch sales are becoming respectable, with about 60% of the top-five smartphone makers now using the model to some degree.

Other makers will be cautious with their current retail distribution models, not wishing to disrupt relationships with channel partners. However, trends have a disruptive mind of their own. Some of Xiaomi’s competitors have been quick to spot and adopt new models.

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