The usual business model here relies on getting unsold wholesale stock from retailers and brands at knock-down prices and selling it on to members of your “private club” benefiting the original brand by clearing inventory without damaging the brand’s reputation. In the case of the sought after iPad, getting severely discounted stock wouldn’t have been possible and so it’s almost certain that this was an intentional loss-making promotion.
On top of the sale itself, there was a strong viral element, with people encouraged to inform friends about the deal, with a prize (an iPad!) on offer for those who did refer sign-ups.
The sale was due to start on Friday at 16:00, and apparently having underestimated the level of demand, the Secret Sales site crashed at around 15:58 as eager bargain hunters started pounding their refresh buttons.
Secret Sales managed to get up a static page apologizing for the site failing under heavy load, and by around 16:10 people were able to get into the site, only to be greeted by a message telling them that the iPads had sold out.
The wrath of the mob
Secret Sales updated their Facebook page suggesting that people come back on the weekend when more iPads would be released.
It didn’t take long for the sentiment of the crowd to turn from anticipation, to annoyance, to outright anger, with Secret Sales unable to keep up with censoring the page as more abusive comments were added. Within a few minutes a new facebook group called “secretsales.com are a big online scamming agent” had been created and started filling up.
At around 17:49, Secret Sales changed their decision about spreading the sale over several days and released all stock immediately, notifying users via Twitter and Facebook:
The additional iPads sold out quickly and visitors were able to get tantalisingly close to the “add to bag” button only to be met by a slightly quirky message telling them that there was no stock.
Unsurprisingly a further barrage of abuse ensued on the retailer’s Facebook page, with some customers enraged that Secret Sales had backtracked on the plan to spread sales out over the weekend. Several named competitor Brand Alley as a better option with others suggesting further investigation should take place to determine whether any advertising or trading standards guidelines had been breached by the promotion. At least one person did post claiming to have successfully ordered an iPad.
Were Secret Sales just naive about how people would react to the sale, or was this a carefully thought out marketing decision? Undoubtedly many thousands of users signed up solely because of the promised iPad sale. Moreover these were good quality leads since they signed up to actually fork out a non-trivial amount of cash (£264).
Despite the complaints on Twitter and FB, how many of these people were paying customers that will now quit using Secret Sales and discourage other customers from using it? As of today, the protest group has only 79 members. It seems likely this will end up being a significant net gain for Secret Sales in terms of registered users, and ultimately paying customers.
In terms of the overall cost of the promotion, let’s assume Secret Sales make a loss of around £250 per iPad, and they have 10 a day for 3 days. That puts the cost at around £8,000 if you count the one free one. If the promotion resulted in a net gain of around 5,000 registrations (possibly a lot higher) then this would give a cost of acquisition of £1.60. Even at £2 a registration, that might still be a good outcome for Secret Sales given that their average customer lifetime value will probably be on the order of £100s. One slight issue is that this product is quite different from their usual fare of clothing and accessories, so it’s possible that a significant portion of the new signups may be quite low value, at least until Secret Sales start selling more consumer electronics. The number of registered users might also be useful in bolstering the perceived value of the business to any potential suitors.
How could Secret Sales have done this better? Much of the anger arose from people questioning if there were actually any iPads available at all. If Secret Sales had been open about the fact that they only had 10 per day (or whatever the number was), then much of this could have been avoided by making the lottery-like chance of nabbing one completely clear. On the technical front, this isn’t the first time the site has gone down under demand, so they’re no strangers to scaling issues, and indeed had mentioned upgrading their infrastructure to cope.
Managing Social Media
Secret Sales’ main channels of communication were their Facebook page and Twitter. Although the promotion had been advertised via email as part of their normal offers mailing, no further emails were sent as the iPad incident unfolded.
The Twitter account, with around 2,000 followers, was active in the lead up to the sale, building up hype with messages like:
The remaining 3 tweets then mirrored those on the FB page, apologizing for the downtime, promising more stock on the weekend and finally changing their mind to release all stock. They made it clear that the weekend stock would not be sufficient to meet demand.
The Facebook page, which appears to be the primary communication channel, has close to 6,000 followers, but obviously lacks the immediacy of twitter. In the build up to the sale, Secret Sales had been actively responding to user queries raised on the page. As things started to go wrong and messages flooded in, they stopped replying altogether. Here it would have been an option to temporarily restrict users from posting to dampen down the emerging criticism and reduce the burden of moderating some of the more abusive messages. Although it’s possible that people would have then taken their complaints elsewhere (Twitter, or other uncontrolled forums), it’s more likely that the majority would have just written off the issue and found better things to do with their Friday afternoon.
On Monday morning, Secret Sales released an apology on Twitter and Facebook, which appears to have received mixed reactions.
It will be a while before Secret Sales can determine whether the damage to their brand is merely a short term blip or something more significant, but hopefully their story will prove to be instructional to themselves and other startups.