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.
Groupons daily deal site in the USA crashed on Friday after listing the first ever deal with the coffee house Starbucks, offering a $10 gift ecard at a 50% discount.
The $5 deal for food and drinks at Starbucks even caused Groupon shares to jump to nearly $5.71 - an increase of 5.9% for the day. Starbucks shares added 0.4% and closed at $57.30. The deal was so popular that Groupons site crashed temporarily with over 100000 users purchasing the deal on Friday morning. The deal was supposed to run for around two weeks, but now it is listed as SOLD OUT on their website.
Many potential customers expressed their frustation on Twitter at being unable to get access to the coupon, which is valid until the 30 September 2013.
Luxa.jp sells everything from expensive sake to high quality skincare products and as their name may suggest, is a luxury focused group buying site in Japan.
Luxa is a daily deals site like Groupon, but they have positioned their deals towards the higher-income market by listing only premium items such as branded cosmetics and alcohol, and up-market restaurants. According to their own sources they have around 350,000 members in Japan.
Today Luxa announced a 500 million yen ($5.25 million) second round funding from the JAFCO Group. Their first round was for exactly the same amount, bringing the total funding to $10.6 million since operations started in August 2010. Luxa’s new funding will be used to strengthen its sales force, accelerate customer acquisition, and “launch various vertical sites targeting specific categories.”
Tour groups get cheaper ways to travel around the world and Groupon or LivingSocial and many other daily deal sites help you get your next weekend hotel accommodation at a reduction of 50-60%. The online world has made collective or group buying a new way of life.
Why is so little done with the group buying market for CARS?
Already in mid 2000, a company called mobshop.com tried the group buying concept for cars in California as a trial and it worked for a while, but then they had to shut down. Recently, not even 2 years ago, Jargul.com in Ireland made an attempt at the concept and did not last long. Currently there are two group buying car sites up and running in the UK carherd.com and carrush.co.uk. Unfortunately not much is known about them either.
In Spain, a six month old startup EverybodyCar looks like it might be moving in the right direction. EverybodyCar calls itself the first social network for car buyers, connecting people in the same geographical area that are interested in buying the same car. C.E.O. David Pareja and his small team then negotiate on behalf of the perspective buyers to get the best deals.
Group-buying site Groupon has been formally warned by the Australian consumer regulator (ACMA) for bombarding consumers with daily email newsletters without adequate consent.
Groupon was issued with the warning because of its practice of signing customers to multiple newsletters, but only offering the chance to unsubscribe one by one.
“Complaints to the ACMA indicated that individuals who attempted to unsubscribe from the newsletters were only unsubscribed from one of them, and continued to receive other Groupon newsletters regularly every day or week,” the Authority's notice about the warning says.
Chinese consumers of daily deals are no different to their western counterparts, so if you asked 1000 Chinese people where they buy online deals for discounted restaurant meals, then you could expect a wide range of different answers; however if you were to ask the same number of Chinese women where they get daily deals on make-up, - most of them would most likely mention Jumei.com as one of their sources.
The reason is that Jumei has shown the value in specialization in China’s ultra cut-throat daily deals market, focusing solely on well-known brands of make-up and skincare products.
Jumei’s CEO is Chen Ou and at the age of 29 was recently listed amount the top 15 web entrepreneurs in China under the age of 30. Chen recently told Chinese media that Jumei pulled in RMB 2.5 billion (US$400 million) in sales in 2012 as a whole, and that the deals site has just started to turn a profit.
This is good news for the daily deal industry and very rare in the current deals business.
Daily deals number two LivingSocial booked $8.6 million in sales on March 5 — a one-day record for the company. The sales boost came largely thanks to a discounted $45 offer for a Sam's Club membership. In addition, a source close to the company told Business Insider that the company shared revenues with Walmart, meaning that the deal was profitable for the company.
"That's a contrast to past deals LivingSocial ran with Whole Food Market and Starbucks, where many believe the company sold discounted gift certificates at a loss, or at best breakeven, in an effort to sign up customers," BI reported.
LivingSocial recorded $536 million in revenues in 2012, up from $250 million in 2011, according to disclosures made in Amazon's SEC filings. It experienced heavy losses, largely from noncash charges related to acquisitions.
Tiger Global Management, a New York investment firm known for its early stage investing in tech startups such as Facebook, Zynga and LinkedIn, has acquired Middle East daily deals website Cobone.com as international investors look to tap the region's growing e-commerce market, according to a person familiar with the matter.
The investment firm has bought out Jabbar Internet Group and senior management's stakes in the Dubai-based website, said the person familiar with the deal, who didn't want to be named because the deal hasn't yet been made public. The transaction is estimated to be in the region of $20 million to $40 million with a combination of cash and equity. It was led by Irish Entrepreneur Paul Kenny.
Mr. Kenny, Pieter Sleeboom, head of strategy and sales, and Warwick Godfrey, head of marketing, will all stay on at the daily deals website.
"They (Tiger) are buying the management team and buying into the e-commerce market in the region," the person familiar with the matter said.
After entering a very crowded daily deals market in the UK only 9 months ago Nectar Daily Deals has announced that it closing its daily deals platform, the latest of a number of deal sites exiting this competitve market.
Launching in July 2012 Nectar hoped that it could make use of its loyalty data from 18.5 million existing cardholders to personalize deals and differentiate themselves from other established players in the daily deals market. Their typical deals included weekend breaks, health and beauty, technology, entertainment and restaurant deals, but Nectar also hoped to offer more product based deals than other daily deals sites, thanks to its existing relationships with brands.
This obviously did not materialize and the closure is officially being blamed on the company that provided them with their white label platform according to their announcement.
"Unfortunately the company we have been working with to provide Daily Deals is discontinuing their deals sourcing operations in the UK. So for now, we are unable to offer any new Daily Deals."
According to a media release today from Trade Me (the internet Giant in New Zealand) it was confirmed that Trade Me will sell its daily deal website Treat Me via a management buy-out led by the current head of Treat Me, James MacAvoy.
Trade Me CEO Jon Macdonald said terms had been agreed with Mr MacAvoy's team, and he expected to finalise an agreement and complete the 100% divestment over the next month or so.
Mr Macdonald said group-buying in New Zealand was still a young industry, and changing rapidly. "We've not been able to give Treat Me sufficient oxygen, mainly because of the bigger opportunities ahead of us in the core areas of our business."