Flash sale sites get a makeover

NEW YORK (CNNMoney) -- The phenomenon known as the flash sale is starting to flame out, forcing some of the bigger players in the industry to reinvent themselves.

Daily deal and flash-sale websites broke new ground by offering steep discounts for a limited time only. But now shoppers are showing signs of fatigue after racing against the clock and being inundated with emails.

In order to survive, many flash sale and daily deal sites are offering more niche offerings, like fine wine and antiques, and doing away with the now-or-never time restraints that put them on the map.

"I don't really want 30, 40 or 50 emails everyday," said Jonathan Marek, senior vice president at Applied Predictive Technologies, a retail analytics firm. "At some point, a consumer is going to say, 'I only want the five that I want.' That's the point that we're reaching here."

Spending on flash sales rose 21% last year, according to American Express Business Insights, which tracks the spending habits of its 90 million cardholders. While that's still strong growth, it's a far cry from the 92% gain these sales saw a year earlier.

And in just the last few months, there's been a decline in traffic to the sites offering these deals, according to the latest data from ComScore. Traffic to Gilt.com, which sells high-end clothing and accessories, has fallen 9% since the start of 2012 (it's still up year-over-year though), while Groupon's (GRPN) traffic has declined 17%.

Slowing demand and increased competition led more than 100 smaller deal sites to shut down last year, while others were acquired by bigger players. Last year alone, KGB Deals, a location-based daily deal site like Groupon, bought TheDealist and SocialBuy, Gilt purchased BuyWithMe, and LivingSocial acquired international sites Ensogo, GoNabit and DealKeren, according to New York-based 8coupons, a daily deal aggregator.

"What is happening and what will likely continue to happen is consolidation of power at the top," said Clayton Moran, senior technology analyst with the Benchmark Company in Delray Beach, Fla.

To be among the ones to survive, there's "a push toward things that make more sense to consumers personally," said Vicki Cantrell, senior vice president of Shop.org, a division of the National Retail Federation.

Big players like Groupon have added new categories, including Getaways and Goods, for deals on travel and merchandise. And Gilt Groupe has expanded its niche offerings with Gilt Men, Gilt Children, Gilt Home, Gilt City (local deals), Gilt Taste (food and wine) and Jetsetter (travel deals).

Notably, Gilt's new offshoots don't all start sales at noon like the initial site did, and some -- like the upscale menswear shop Park & Bond -- aren't even discounted at all, but are rather just a collection of designer clothes with designer price tags. Sales start throughout the day and can last last for several days at a time.

Flash sales are still the company's bread and butter, according to Andy Page, president of Gilt, but "we've diversified a bit," he said. As a result of the changes, "there's a lot more time spent on the site and that's good for us."

Although a smaller percentage of Gilt groupies now log on precisely at noon, the number of shoppers that come to the site is up by more than 40% overall because of the expanded offerings, he said. Revenue rose to $500 million in 2011 up from $423 million the year earlier, according to the company.

"Industry wide, we're seeing these companies try to branch out. It's a way to leverage the existing user base to make more money off of them," Moran noted.

Still, "Gilt is not aspiring to be a high-end Amazon," Page said. "We're trying to be responsive to a customer's entire aspirational shopping needs and wants."

Other sites are following suit. Home furnishings flash sale site One Kings Lane recently announced the addition of Vintage & Market Finds, where a selection of marked-down furniture, accessories and art are available for five days at a time as opposed to its usual 72-hour timeframe and new items are added daily.

"Consumers love it when you keep it fresh," said Doug Mack, One Kings Lane's CEO.

And ultimately, that's what will need to happen to keep the industry alive. "I do think there's a long-term place for a daily deals offer, but you don't need 10 different daily deal providers, you only need two or three," said Benchmark's Moran.