Friday, 29 March 2013 21:55

Are Daily Deal Websites Dead?

Written by  Sky Stebnicki
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Editor’s Note: The following is a guest post by Sky Stebnicki, CTO and co-founder of Givacause. He is also the CEO and founder of Aereus which helps business grow through strategic use of technology and innovative management and recently he launched an increasingly popular business collaboration suite called Netric.

According to the Wall Street Journal, a prominent list of high-profile investors are dumping their Groupon stock because they have lost faith in the company. Groupon reported a 13.7 percent drop in business this quarter form last quarter. But they are not the only daily deal company struggling. LivingSocial laid off 400 workers in November and a report by Techcrunch estimated that 789 daily deal sites folded in the last 6 months of 2011.

Are we witnessing the decline of the daily deal business as many seem to be saying? In some ways I think we are, and I believe it to be a very good thing! I also think we are only just beginning to see the real value of deal/coupon websites; but we need fix a couple things before we have a sustainable business model.

 

First, Businesses Need to Win

A sustainable daily deal website must establish a win-win model where both consumers and businesses feel they are getting added value.

Examples abound of small businesses being devastated and losing thousands to customers brought in through Groupon who spend little and never return. A restaurant in Portland Oregon reported losing $8000 and stated working with Groupon was the "Worst business decision they had ever made." According to the New York Times, Muddy's Coffeehouse in New York had to take out a loan to cover the losses they sustained after working with Groupon.They concluded that "never again will they offer a daily deal through Groupon."

While the daily deal craze has really done well by the consumer, many small businesses have suffered huge losses with little or no long-term benefits. As with all one-sided relationships, things may be really nice for the winning party for short time, but eventually the losing party will leave; and that is exactly what is happening. Businesses all over have decided the daily deal frenzy is just not worth it.

This creates an interesting problem because the engine that makes daily deals work for consumers is the desirability of the coupons. So as well-liked businesses jump ship, so too will consumers because the number of quality coupons has and will continue to dwindle.

However, this leaves open a door for coupon websites that do a better job of providing a win-win for consumers AND business. For instance, according to Ben Edelman, a professor at Harvard Business School, there are good daily deal sites that have and will continue to provide value for all parties. For example, Restaurant.com does this by making the terms of the coupons more flexible for restaurants. Edman contends that, "Restaurants like the fact that it does not require them to pay for the daily deal and that it lets them add restrictions to push business towards slow nights."

The daily deal companies that survive, and even flourish in the current down-turn will be ones that do a better job of providing value to businesses as well as customers.

Second, Consumers Need Something New

There are so many daily deal websites now that where once people jumped for joy at every email titled "Daily Deal" they now find themselves annoyed. In fact, many users have started to consider daily deal emails spam and tens of thousands are opting out though websites like UnsubscribeDeals.com.

In order for users to get excited about daily deals again companies are going to have to come up with solutions more innovative than a single bulk email being sent out once a day.

For example, at givacause (a website I am involved with) users get coupons that provide a considerable discount, but they also gain access to a very simple way people can give back to their community while they are saving money. I believe that like many things in marketing, daily deal sites are going to need to find something that differentiates them from the hoards of deal websites out there.

My Prediction: Daily Deals Are Far From Over

Despite the current and inevitable shake-up in the daily deal fad, I believe we will see a resurgence of coupon and daily deal business in the next few years. As with all businesses, many will fail, some will get it right; but one thing is for certain, the honeymoon period is over and the only companies that will be left standing will be the ones that offer a win-win for everyone involved.

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