eCommerce is going through a second revolution, and flash sales have become a big part of that story over the last two years. Sites like Gilt, Rue La La and Fab have been getting a lot of attention from both consumers and investors. Yet, while many flash sales sites focus on luxury products or fashion, NYC-based startup NoMoreRack is finding success by trying to give consumers the things they need in everyday life at reduced prices — to enable users to afford products they couldn’t otherwise. Co-founder Melina Ash tells us that the startup wants to be the Walmart of deals — with a little TJ Maxx and Target to boot.
Their goal has been to cut out the middle men and work directly with suppliers to put consumers closer to the products they buy, offering an average of 70 to 80 percent off everything from consumer electronics to clothing.
Launched initially in Vancouver, the startup has flown under the radar compared to others in the space, but in just 18 months, NoMoreRack has grown like a weed. Today, the startup has grown to a team of 30, with 4.5 million subscribers, 25 million page views per month, and is selling 8,000 items a day — and 5 items per minute.
In the first two quarters of 2012, NoMoreRack did $46 million in revenue, and Ash tells us that they’re projecting to do $100 million in revenue this year. That’s not bad for a startup that hasn’t taken a penny in outside funding.
Of course, flash sales have taken a lot of heat over the last year for being more of a marketing gimmick than a disruptive eCommerce vertical complete with sustainable business models. There’s been a lot of cutbacks, layoffs, and consolidation in flash sales, in spite of the excitement from consumers over finding exciting digital venues for their impulse purchases.
But like Fab, ask the NoMoreRack founders how they define their business, and they’re quick to say they’re not a flash sales site. That’s not exactly true, as the site offers nine big deals per day, posting those discounted items for sale at the top of the site (along with hundreds of other items) in the morning and wrapping up every night, meaning that most deals last 24 hours. That sounds like a flash sales model, doesn’t it?
However, in the last few months, the startup has expanded on its core model, offering what it calls “events.” Events typically focus on one area, like household items for example, and might offer 20 to 50 related products for a longer period of time, say, three to four days, for example. This will become a larger part of the startup’s business as it attempts to evolve into a true eCommerce site, not a one-trick flash sales pony. (Part of the reason that NoMoreRack had a record day on Monday, selling 20K+ items, and just north of $500K in revenue.)
Of course, ust as the road has bumpy for flash sales sites on the whole, so, too, has it been for NoMoreRack. A quick Google search is all one needs to see that, in the beginning, the site struggled with being able to juggle working directly with retailers and wholesalers, manage quality in buying overstock, while maintaining quality customer service.
There are more than a couple of complaints to be found about having orders cancelled because of damaged goods from suppliers, or customers receiving the wrong item or not being able to get a refund without making a ton of noise. These are big problems (not to mention the poor SEO), but ones that the co-founders are quick to own up to.
At the outset, NoMoreRack advertised a penny bid auction, which caused many of those customer complaints, but the startup has since moved past any penny bid controversies to greener pastures. It now offers a “make it great” guarantee — full refund for those not satisfied with what they get, along with a 30-day window to return items.
Ash tells us that a good portion of the revenue they’ve created, they’re sinking back into customer service, knowing that their long-term viability relies not only on offering good value, but keeping their customers happy. No easy feat in the flash sales world.
Today, two stats in particular show that the company has been making progress in this regard: The co-founders tells us that 50 percent of their customers return to buy again and that 75 percent of the revenue over Q1 and Q2 came from repeat buyers.
Beyond a renewed focus on customer service, the co-founders attribute their success to focusing on a mass market, offering a broad spectrum of products, instead of going the design-driven route, like Fab. Taking a page from Zappos, NoMoreRack also focuses on fast and affordable shipping and fulfillment, offering a $2-per-item flat shipping rate.
NoMoreRack continues to tweak its model as it moves forward, with its sites set on becoming a viable online retailer in the order of the Walmarts of the world. Looking to the future, Ash sees plenty of room for growth in both apparel and household products. It’s also becoming critical for eCommerce businesses to focus on mobile — a part of the NoMoreRack business that’s been underdeveloped of late as the team focuses on managing scale.
But Ash tells us that the company is in the process of developing mobile apps, for iOS, Android, and the Web, which she hopes will launch in the next few months. The team also moved into new office space near Union Square into New York to be closer to the eCommerce action — a move which puts it in good company, thanks to Mayor Bloomberg’s efforts to attract technology companies and startups to the Big Apple.
With renewed focus on mobile buying and customer service, NoMoreRack stands to become a bigger part of the online retail conversation — especially if it’s able to maintain its 70 to 80 percent discount rate. The key is cultivating an engaged membership and not wearing customers out with emails, as so many flash sales sites tend to do. That kind of value is hard to ignore.
