The truth behind online sales

Call them flash sales, secret sales or private sales, they all mean one thing: deals that promise heavy discounts for a limited period of time. A concept that is extremely popular abroad, online flash sales have now found their way into India.

But how is an online flash sale different from a store sale that luxury brands and designers often hold? Vehbi Sinan Tunalioglu, CEO, Brandmile.com, an Indian flash sale portal, explains the difference: "While both processes help suppliers liquidate their excess inventory, our main difference (when compared with brick and mortar stores) is the reach that we provide as our customers can buy the merchandise from any part of the country."

But are these 'super-saver deals' as great as the online sellers make them sound? Let's take a look at what lies beneath.

The lure of discounts It's hard not to reach for your wallet instantly when you come across a deal promising a 50% discount. Such heavy discounts are par for online sellers, who even claim to offer up to 70% discounts. But it's tough to determine the genuineness of these. As most sceptical buyers will tell you, sellers often hike the mark-up price and then offer a heavy discount. For instance, a flash sale portal was offering a designer handbag from Coach on 23 February at a discounted rate of Rs 16,999, claiming the original shelf price as Rs 33,525.

Evidently, the rate has been slashed by about 50%. However, when cross-checked on the US retail website for Coach, the same bag was priced at $298 (Rs 14,602). Amazon too had a similar bag which it can ship to India for a total delivery charge of $47 (Rs 2,303). Obviously, your total expenditure would be Rs 16,905. So, would you actually end up saving money if you buy from the sale?

The tag of exclusivity
Indian luxury flash sale portals claim to offer exclusive memberships. However, this is just an illusion. You don't strictly need to be 'invited-in'. Anyone can become a member by registering directly on the portal and then inviting anybody they want. In fact, some websites reward you with credit points each time one of your referrals makes their first purchase on the portal. So, if 99labels.com boasts about four lakh registered users, it would make your 'exclusive access' seem like a pin in the haystack.

Another hitch is that though you'll get trendy designer wear, it's going to be, unfortunately, last season's trends. Most of these sites, such as Fetise.com, mention clearly that they sell previous seasons' garments which have not deteriorated in quality. Other sites, such as Exclusively.in, will offer products from up-and-coming designers like Namrata Joshipura, Anaikka, and Raakesh Agarvwal, who would like to liquidate their unsold and excess inventory through these sites. Abdul Halder, a Bangalore-based fashion designer, says, "Usually, the products offered on flash sale sites are from a designer's existing collection. They often include products that haven't been showcased previously but are included to widen the product range, and, to an extent, make the deal more viable economically." So, if you are coveting a designer dress for less, be prepared to compromise a bit on the 'current season's trends.'

There is no race
Flash sales cash in on the urgency factor. They last for a day or two, or a week at the maximum. The deals are available for a limited time, but, you must ignore the ticking clock before you buy. Says Naina Singh, a 30-year-old advertising executive: "I came across a so-called exclusive deal on a sale portal, which was offering a six-piece Giordano travel combo set for about Rs 7,000, for only three days. I was still trying to make up my mind when the deal got over. After almost a month, I saw the deal again on the same website. What's more, the same set was also being offered under my credit card reward point scheme."

Though most websites feature only a handful of deals at a time, they need to constantly bring out new deals every week. There's no guarantee that their inventory will be sold, which is why the old deals get repeated after some time.

Check whether the product being sold for a limited period is also available on other sites. For instance, at a perfume sale for four days on FashionandYou.com, a 100 ml bottle of Hugo Boss No. 6 eau de toilette was available for Rs 2,975, while the online retailer Perfume2order.com is offering the same product for Rs 2,790. The more interesting part: While the former claims the original price to be Rs 3,800, the latter says it's Rs 4,900. No wonder, buyers are wary of the claims made by most online sellers.

Should you go with the crowd?
Flash sales on a group deal site, such as Crazeal.com and Mydala.com offer discounts on restaurants, trips and events only if a certain minimum number of buyers opt for the deal. So, the first thing you need to check is whether the booking amount will be refunded to you if the deal is cancelled due to a lack of buyers. Some consumer forums have complaints lodged by buyers of how the travel vouchers they had bought from deal sites were not honoured by the hotel or tour organiser, which claimed that they had no vacancies.

This led to the vouchers expiring and a loss for the buyers. However, sale portals are taking measures to resolve these issues. Says Ankur Warikoo, CEO, Crazeal.com: "We have proactively taken steps to review our customer policy which has led to a 90% drop in complaints. For travel deals, the merchant contact is always visible and we have put in place a 100% refund policy on travel deals within 14 days of purchase."

So, check the fine print carefully before opting for a travel deal from any flash sale portal. For how long is the travel voucher valid? Is it inclusive of everything or only the room rate? Will you have to pay a penalty if you cancel after booking?

Flash sales work best for discerning shoppers who can trawl the Net or those who are well aware of the retail store prices. For the newbie who wants to indulge in retail therapy online, it might be better to visit lots of similar sites and compare the prices of the deals before zeroing in on one.

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Detroit automakers race to keep up with sales

DETROIT (AP) -- Auto sales are growing so fast that Detroit can barely keep up.

Three years after the U.S. auto industry nearly collapsed, sales of cars and trucks are surging. Sales could exceed 14 million this year, above last year's 12.8 million.

The result: Carmakers are adding shifts and hiring thousands of workers around the country. Carmakers and parts companies added more than 38,000 jobs last year, with industry employment averaging 717,000 for 2011. And automakers have announced plans to add another 13,000 this year, mostly on night shifts.

But there's a downside. The newfound success is straining the factory network of the Detroit automakers, as well as the companies that make the thousands of parts that go into each vehicle. This could lead to shortages that drive up prices.

And it also has auto executives in a quandary. They got into trouble in the first place largely because their costs were too high. Now, they fear adding too many workers.

Ford, for instance, is "squeezing every last component, transmission, engine out of the existing brick and mortar," says Jim Tetreault, vice president of North America manufacturing.

Still, the hiring surge bolsters the argument of those who supported the federal bailout of General Motors and Chrysler in 2008 and 2009. The bailout has been a major issue in the days leading up to Tuesday's Michigan Republican primary.

And the hiring is good news for communities around the country that saw hundreds of thousands of manufacturing jobs disappear. Starting in 2005, GM, Ford and Chrysler closed 28 factories and eliminated 88,000 jobs. Parts companies cut another 234,000.

Now, if sales hit 15 million by 2015, as some experts predict, the three Detroit automakers could hire another 20,000 people, predicts Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor, Mich.

"You can only squeeze so much out of the same amount of people," says Itay Michaeli, an auto analyst at Citi Investment Research.

Laurie Schmald Moncrieff, president of a small parts-manufacturing company near Flint, Mich., says when demand for auto parts collapsed, she shifted production to parts for companies in green energy, aerospace and defense.

Now, automakers and other parts suppliers have her on speed dial, trying to line up everything from fuel pump parts to tools that make hoses. She just added six workers and may hire another five. "I see tremendous growth coming in the near-term," she says.

Like many parts suppliers, she's having trouble finding people with the skills to run machinery in her plant.

The hiring binge couldn't have happened at a better time for Michigan. Many of the new auto jobs came around the Great Lakes where the Detroit Three have most of their factories.

The bailout that helped bring the jobs could be a deciding factor in who wins the Republican presidential nomination. Both front-runners, Rick Santorum and Mitt Romney, opposed the bailout, and Tuesday's Michigan primary will show whether Romney damaged his chances in his native state.

Romney stuck to his stance on Monday, saying in an appearance on Fox News that President Obama favored the United Auto Workers union in the bailout. The president "was paying off the people that supported him and that, by the way, are trying to get him re-elected," Romney said.

But in a state where unemployment was above 14 percent just three years ago, any jobs are welcome. And Michigan is not the only region to benefit. Ford is adding positions in Louisville, Ky., Chicago and near Kansas City, Mo. Chrysler is adding jobs in Belvidere, Ill., and General Motors is hiring at plants in Tennessee, Kentucky, Texas and New York.

New jobs with auto companies don't pay as well as the old ones. Under union contracts, companies can pay new hires around $16 per hour, a little more than half the pay of longtime workers.

Foreign carmakers are also shifting production to the U.S. because of higher sales and the weak dollar, which cuts the profits they get from selling vehicles exported to America. Nissan is adding workers in Tennessee. Toyota just hired staff at a new plant in Blue Springs, Miss. Honda is hiring in Alabama and Ohio. Hyundai and Kia plants in Alabama and Georgia are running flat-out but can't meet demand for some models such as the Hyundai Sonata and Elantra.

The sales rebound comes with risks that are familiar to Detroit. Crank up production too much and carmakers have to sell vehicles at deep discounts. Boost production too little, and companies could run short of vehicles such as pickup trucks. And even if they find the right balance now, automakers are leery of raising long-term costs by adding plants and workers.

Six years ago, Detroit's automakers were losing billions, in part because they had too many plants and workers. And union contracts forced them to pay workers even if plants were shut down. So automakers kept the factories running regardless of whether vehicles would sell in order to cover expenses. They built too many cars and trucks and sold them cheap, sometimes at a loss.

Now, they're doing everything they can to keep costs under control.

Growth is putting the squeeze on Hyundai and Kia factories. But the affiliated companies will build as many vehicles as possible at two U.S. plants before constructing a new factory. John Krafcik, Hyundai's U.S. CEO, says the first choice is to find areas inside the plants that are slowing the assembly lines and fix them, "because plants are expensive."

GM also will try to handle growth by stretching factories, says North American President Mark Reuss. But he thinks the company will have to hire more workers if sales this year reach 13.5 million or beyond.

Auto factories in North America will reach 90 percent of their capacity if sales hit 14 million, says Michael Robinet, managing director of IHS Automotive Consulting, which forecasts auto production.

The lack of factories, though, could cause automakers to run short of pickup trucks this year, says McAlinden.

Detroit automakers, which dominate truck sales, had far too many pickup factories just seven years ago. They have closed eight truck plants since 2005, removing the ability to build 2.25 million pickups a year. With only nine North American pickup plants left, they may have cut too much, McAlinden says.

Last year Americans bought 1.8 million pickups, an 11 percent increase over 2010, as the economy improved and small and large businesses began replacing their aging vehicles. Pent-up demand is fueling the sales. The average age of a truck on U.S. roads has reached a record 11 years.

If sales increase as projected, companies also could run short of compact cars and small SUVs.

It adds up to what could be a challenging but profitable year for the industry, says Schmald Moncrieff, who runs the Michigan parts factory.

"A lot of things are going to start breaking loose all at once," she says.

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