Drapers meets brothers Sach and Nish Kukadia, who founded the UK’s first flash Sales site SecretSales.com in 2007, which turned over £37.5m in 2014.
Spotting an opportunity following the launch of Vente-privee in France in 2001, Sach and Nish adapted the concept for the UK, launching SecretSales in 2007 and growing it into the UK’s largest flash Sales site. The platform – which now employs 110 staff and hosts four-day Sales for brands like Burberry, Prada, Paul’s Boutique and Fiorelli, alongside homeware, beauty and electronics – boasts 4 million members and attracted peak traffic of 250,000 daily unique users during September to December 2014.
How has SecretSales survived and thrived while other flash Sales sites have failed or left the UK?
Sach: It was all very organic. We built the business borrowing £10k off our father and we put our parents’ house on the line and borrowed another £100k from a bank. We were very bootstrapped and young, and we made a lot of mistakes, but we were very quick to learn.
Because we didn’t have an enormous amount of space [at the first office in London’s Park Royal], we had to design our processes to be very efficient. If we couldn’t pick, pack and have our product ready for dispatch in 24 hours, the next load of product that arrived would be sitting outside in the rain. So everything was built around efficiency.
We have focused on categories that allow us access to stock with low margins, such as accessories and footwear. While we sell homeware and ready-to-wear, these aren’t key areas for us.
We have also moved away from emotional decisions, with everything driven by our data warehouse so it’s all about understanding customers.
[After securing a £6.3m investment from Partech Ventures, Pentech Ventures and Doughty Hanson Technology Ventures in 2012, the business focused on its technology.] We went from being a retail business that was online to an online business that was doing retail; that’s been the driving force over the last three years.
A key element of this tech investment has been personalisation. What are you doing and why?
Nish: Our technology team has built algorithms that allow us to track customers’ behaviour from the point they register to the point they drop off. This year we will track 300 million unique user journeys.
We take this behavioural data and different factors, like the interest in a Sale and available quantities, and transform that into personalised emails. We can create 70,000 different email variations and we also use this for the homepage, so the right products are in front of new and existing customers.
On the homepage we have seen a 3% uplift in sales, and we have seen email open rates rise by 7% in the year to date.
We launch 10 to 20 Sales daily and every customer receives an email in the morning, which acts as their invite. We are personalising the content because we want those invites to be more appropriate for shoppers; if it’s relevant you click through and buy quickly. The business is based on spontaneity. You don’t go on SecretSales because you’re looking for something in particular; you’re encouraged to buy something you feel is too good to miss.
It’s a very powerful mechanic for brands because it enables us to channel the best customers to their Sale in a concentrated way and allows us to clear huge amounts of inventory in a short space of time.
How have you developed strong relations with brands?
Sach: The first few years were extremely hard for us in educating the market about what flash Sales were and the consignment model, which went against all codes of convention for traditional retail. We went to all the trade shows to promote SecretSales, but the first year or so we had every door shut on us. So we went to Italy and bought some stock [from fashion houses including Prada and Versace]. We bought a lot upfront because it was hard to convince brands to work with us directly. In the first three years we went from having no accounts to more than 300. We’re now working with 1,500 accounts across men’s, women’s, kids’, home and electronics.
We work exclusively with Vivienne Westwood and Dunhill [stock is not sold via other UK flash Sales sites]. We also stock brands like Christian Louboutin that will sell within the first 10 minutes. Other top brands include Oliver Sweeney and Gant.
Brands are now treating flash Sales as an additional revenue stream; it’s not just a clearance mechanic. Without mentioning names, we now have brands that produce thousands of units for us on a yearly basis because they understand the value of working with us over the course of 12-month cycles.
They can do a flash Sale with us for four days. They’re assured by the profile of customer we have and then it’s off the site, so it doesn’t affect their full-price retail channels. No brand spending a lot on marketing wants to dilute the impact by having their product on Sale for months on end. Having a discreet Sale that’s impactful goes a long way.
How are you getting so many shoppers to convert on mobile?
Nish: 70% of traffic comes in off mobile and 60% of sales are mobile. [It’s about] great user experience. We were a launch partner for login and pay with Amazon and Paypal in 2014 and they really helped to dial up conversion.
Sach: It also boils down to the business model; if you don’t access it when [the Sale is live] you miss out. It’s the three minutes while waiting for your kids at the school gates.
SecretSales is yet to make a full-year profit. When will that come?
Nish: Brands will only work with you if you can clear high volumes of stock. The only way to do this is to have high volumes of members and a very engaged audience, and you have to spend money online to attract and retain them. We have outstanding customer retention metrics; 75% of revenue this year is coming from customers on our database at the end of last year or earlier.
 won’t be fully profitable as we’re still investing in growth and we’ve made some investments in infrastructure to boost the technology team. In 2016 we expect to be fully profitable.