Why Flash Sale Companies Were Destined to Crash
Lessons from One Kings Lane
In the aftermath of the 2008 financial crisis, the world was gripped by economic uncertainty. Consumers, battered by the downturn, became acutely deal-conscious, looking for ways to stretch every dollar. This shift in behavior created fertile ground for a new wave of e-commerce: flash sale websites.
Companies like Groupon, LivingSocial, Gilt, and One Kings Lane emerged to capitalize on this trend. Their pitch was simple but compelling: limited-time, deeply discounted offers on everything from spa experiences to luxury home goods. For a time, these businesses thrived, attracting billions in venture capital. At One Kings Lane, we rode this wave, raising a $112 million Series E funding round in early 2014 that valued the company at nearly $1 billion. (Source)
But what looked like a gold rush turned out to be fool’s gold. Flash sale and discount websites were destined to crash. Here’s why:
The Problem with Flash Sales
1. Email Overload and Consumer Burnout
At the core of the flash sale model was urgency. Shoppers were bombarded with daily emails advertising “exclusive” deals that would expire within hours. Initially, this sense of scarcity worked well to drive conversions. But over time, the constant barrage of offers led to email fatigue. Consumers started tuning out. The excitement and novelty of flash sales wore off, and shoppers simply couldn’t keep up with the relentless pace.
2. Shoppers Treated Us Like Discount Shops
Even for premium flash sale sites like One Kings Lane and Gilt, the fundamental problem was consumer perception. Shoppers came to these platforms to find deals on high-end products, whether it was luxury furniture or designer apparel. The problem? They only came for deals. The business model made it nearly impossible to shift customer behavior toward full-price shopping or cultivate a sense of brand loyalty. Consumers didn’t think of One Kings Lane as a furniture brand; they thought of us as a place to get a discount. That perception was hard to break.
3. Unsustainable Profitability
The deep discounts offered on these platforms didn’t just attract deal hunters—they eroded profitability. At One Kings Lane, like many others, we operated on the assumption that we could eventually increase customer lifetime value (LTV) enough to justify our high customer acquisition costs (CAC). But this proved difficult in practice. It was hard to drive LTV to levels that made customers truly profitable.
Compounding this was the long payback period. For many flash sale sites, it could take two or three purchases before a customer’s spend offset their acquisition cost. This slow payback meant we needed significant amounts of capital to sustain growth. With cash tied up for long periods, the business model became increasingly capital-intensive, but we weren’t achieving the scale required to make the economics work.
A Business Model That Couldn’t Support VC Valuations
The challenges above created a vicious cycle. Flash sale companies needed ever-increasing amounts of capital to grow, but the growth was coming at a steep cost. From a venture capital perspective, this made the business model unsustainable.
Investors who had once been enthusiastic about the promise of rapid customer acquisition and billion-dollar exits began to realize that these businesses couldn’t scale profitably. The valuations that had once seemed reasonable now looked wildly optimistic. In 2016, One Kings Lane was sold to Bed Bath & Beyond for what was described as a “not material” amount—an extraordinary drop from our nearly $1 billion valuation just two years earlier.
The Intensity of Flash Sales
Running a flash sale business was exhausting. Every day required lining up new deals to keep customers engaged. There was no consistent, evergreen revenue stream to fall back on. If the daily deals weren’t compelling, sales would slump. It was a relentless treadmill, and stepping off it—even to pivot to a new model—was nearly impossible without sacrificing the revenue streams keeping the business afloat.
The Rise of Direct-to-Consumer E-Commerce
Around the same time flash sale companies were floundering, a new wave of direct-to-consumer (DTC) e-commerce brands began to rise. Companies like Casper, Warby Parker, and Glossier built their businesses on strong branding, influencer partnerships, and direct relationships with customers.
Unlike flash sale sites, which were saddled with their discount-driven reputations, DTC brands focused on storytelling, quality, and value—not urgency or price. They developed loyal customer bases and repeat business without relying on relentless email promotions. Flash sale sites, constrained by their business models, struggled to adapt and missed out on this opportunity.
Why Flash Sale Companies Couldn’t Pivot
One of the greatest challenges facing flash sale companies was their inability to innovate away from the flash model. Successfully pivoting would have required giving up the very revenue streams the business relied on. With significant VC funding and the accompanying growth expectations, walking away from the flash sale model was almost unthinkable.
Even if we had wanted to pivot, the brand perception was a major obstacle. For One Kings Lane, consumers associated us with discounted furniture. Convincing them to think of us as a full-price, evergreen retailer was an uphill battle we couldn’t win.
Lessons Learned
The collapse of the flash sale trend offers several important lessons for entrepreneurs:
Sustainable Models Matter: Building a business entirely reliant on discounts and urgency can drive short-term growth, but it’s incredibly difficult to sustain. Focus on long-term customer value instead.
Customer Perception Is Hard to Change: Once consumers associate your brand with discounts, it’s nearly impossible to shift their perception.
Beware of Capital-Intensive Growth: Businesses that require constant injections of capital to grow risk collapse if the economics don’t eventually stabilize.
Revenue Consistency Is Key: Flash sale businesses struggled without a predictable revenue stream. Models that rely on one-off spikes in sales are inherently risky.
Final Thoughts
Flash sale sites like One Kings Lane enjoyed their moment in the sun, fueled by a post-recession appetite for deals and an abundance of venture capital. But the very factors that drove their early success—deep discounts, consumer urgency, and high-intensity deal-making—ultimately led to their downfall.
While these companies may not have achieved long-term sustainability, they left behind valuable lessons for today’s e-commerce entrepreneurs. The next wave of online businesses must prioritize sustainability, customer loyalty, and adaptability over quick wins and rapid growth.
Great writeup and thoughts here, thank you for sharing.
Curious - any current businesses models / venture backed ecosystems have similar structure today?