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The bubble of fashion flash-sale sites that thrived as a result of the 2008 recession may be on the verge of popping, in part because traditional retailers have bitten back on the high-tech hand it fed them. Due to layoffs at big players like Gilt Groupe and overhauled business models at smaller ones, e-commerce insiders are just about ready to declare the end of the rise of the flash sale. "There's still a little growth left, but not that much," the CEO of, an e-commerce software provider for retailers, tells Women's Wear Daily's Sharon Edelson. "There will certainly be a lot of carnage in the flash-sale space," one venture capitalist tells The Verge's Russell Brandom. "If you're not the leader, it's really hard."

So while the Rue La Las, Gilt Groupes, and Fabs of the startup world should survive, the Ideelis and Beyond the Racks may not. This inevitable contraction has a lot to do with the Silicon Valley over-saturation often seen in other markets — every Stanford business-school grad and their roommate seems to have a fashion idea these days, much like photo-sharing apps proliferated before Instagram showed its dominance. Indeed, the Internet only has room for so many of these sites sites for short-term shopping deals. But there is something else killing the flash sale: Retailers have regained control of the technology behind their own market, getting better at selling the right amount of clothing, which means less left-over inventory for the flash sites to gobble up.

Like TJ Maxx and other outlet hubs of the brick-and-mortar shopping market, flash-sale sites rely on unused inventory from traditional retailers. Since 2008 these sites have boomed, with Gilt begetting clone upon clone, because the recession left a lot of clothing sellers with too much extra stuff. Since then, retail spending has recovered, with April 2011-2012 seeing 6 percent more shopping than the 12 months following July 2008 — and less unbought clothing for startups to capitalize on. But in tandem with this comeback for traditional retail, big-box stores have learned how to sell clothes more efficiently again, largely through improved inventory and stocking technologies. "Nobody wants to give away their inventory at a low price," said Tommaso Trionfi, the executive. "Technology is helping manufacturers forecast better and better."

In addition to outfitting staffers on the sales floor smartphone apps that can check inventory — and boost sales with in-person checkout anywhere on the floor, Apple Store-style — retailers have invested in data analysis to track buying trends, hoping to stock their stores more efficiently. For example, the eight biggest global retailers, including The Container Store, work with a company called MicroStrategy, which turns "big data into an even bigger competitive advantage with predictive analytics," as it explains on its website. Or, as The Washington Post's Danielle Douglas explains it: "MicroStrategy, for its part, provides retailers insight into their performance through software that allows them to analyze sales trends, operations and inventory." With better tracking technology, actual stores can now better predict how much stuff to stock, resulting in better sales for them and less left-over goodies for their come-lately competition. 

Another app, Lemur IMS, helps stores sell slow moving inventory by alerting local consumers to sales on specific products, as creator Will Feuntes told the Post. "If a customer wants to buy a television that is priced at $1,000 but only wants to pay $950, managers can offer to contact the customer if the TV can be discounted in the future," Fuentes explained. "This helps move the product quicker."

These traditional retailers would rather have a more efficient sales model themselves than give way to a world where flash sales overcome retail altogether, and so a new norm appears to have been fended off for now. "The brands ultimately don't want to sell through Gilt for pennies on the dollar. They want to be smarter in their inventory planning," FAB CEO Jason Goldberg told The Verge. And thanks to catch-up technology, major brands are getting better and better at doing just that. And when the apps on the floor or the data in the warehouse don't get the job done, many of the biggest department stores, including Saks Fifth Avenue, Nordstrom, and Neiman Marcus (and Amazon), now have flash sites of their own.

This article is from the archive of our partner The Wire.

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