Trade Resources Industry Views The Daily Deal Industry Has Fallen a Long Way and Created a Niche Within E-Commerce

The Daily Deal Industry Has Fallen a Long Way and Created a Niche Within E-Commerce

The daily deal industry has fallen a long way since Groupon came onto the scene in 2008 and created a niche within e-commerce. Tineka Smith reports.

Daily deals innovator Groupon burst onto the scene in 2008 and by 2010 had clocked up 35 million registered users.

But the whirlwind was short-lived. Before Groupon became a public company in November 2011 Google had offered to buy it for a hefty $5.3bn, but had been rebuffed. The search engine giant perhaps got off lightly because the market value for the business it wanted to acquire has plummeted from $16bn to just$3bn since the IPO. Groupon, however, is not alone, with many companies in the daily deals industry seeing their sales and shares plummet in 2012 after they had flourished in 2010 and 2011. For example, rival Living Social laid off about 9% of its global workforce and reported significant losses in Q3 2012.

E-commerce experts say that in order for this industry to survive it must evolve and diversify, but with 800 daily deal companies failing in 2011 alone, the disease could be terminal.

Reasons to be fearful
One major reason cited for the decline is that retailers no longer need daily deal aggregator sites to attract a large number of online customers, with social media increasingly enabling retailers to build up their own databases and send out messages about a deal through Twitter feeds or Facebook pages."Retailers don't necessarily need Groupon's buying power anymore," says Stuart Fuller, head of communications at online brand protection and research firm NetNames. "They've been able to develop their own business models and social interactions that help them survive and flourish without needing to use Groupon."

Social media also provides other benefits.

"It creates brand awareness and has become the fastest recommendation and referral channel," says Stavros Prodromou, director of the eDeal Association. "We all know of deals that have gone viral, sometimes with significant consequences for the merchant."
He continues: "Social media is also playing an increasingly significant customer services role, as the mobile generation is more likely to tweet or blog about bad experiences than call a customer helpline."

As for Groupon, Fuller adds that the company's deals, which were innovative and groundbreaking two years ago, have lost their lustre, and that daily deals businesses have to push the boundaries and continually redevelop their platforms to offer new deals and products.

Another problem, he continues, is that the business model has been replicated by so many retailers that it no longer attracts consumer attention.

"When a business model comes out, if it's successful then people will try and replicate it and adapt it to their existing model," Fuller explains. "So what you'll find with Groupon is that a lot of retailers will try and develop its model."

A changing landscape
It's not all doom and gloom. According to a report by the Economist Intelligence Unit, online shopping will account for nearly a third of all UK retail commerce by 2022. Furthermore, in 2012, UK consumers spent more than £292m on daily deals sites in six months. The UK had more than 70 such websites, while 200 new sites were launched throughout Europe, also within a span of six months.

"The opportunities for retail over the next decade and beyond are enormous," says Jon Copestake, chief retail analyst at the Economist Intelligence Unit. "But where the future markets will reside and the way in which we buy goods will change dramatically."

While there is still a public desire for money-saving deals, some experts say that in order for the industry to survive, personalisation and Big Data will be vital.

"To increase customer retention and boost sales in the long term, there is a big trend towards personalisation to ensure that the right deal reaches the right consumer, at the right time," says Prodromou. Early daily deals companies used email to attract customers, but that's changing, with the growth of mobile - there has been a 200% growth in mobile applications in the past 18 months - altering the way consumers want to access deals. Consumers are increasingly expecting information to be pushed to them that's more targeted.

"Email is such a mass blast with the hope that you'll pick one or two people up; whereas a mobile app allows people to go and search for the deal they want when they want them," says Fuller. "As consumers we don't want to be bombarded with information. We want to choose when we want it and how we want the information."

Many e-commerce experts believe that location-based services will also become a key driver, while, NetNames' Fuller believes the daily deal will eventually be replaced by 'on-demand' offers, particularly as the adoption of mobile technology means that consumers are used to accessing the information or deal they want almost immediately.

Peter Casey, European director at Nimble Commerce, says: "Publishers are already moving away from the time-limited, deep discounted offers that have been labelled 'daily deals' in exchange for methodologies that are more sustainable. In 2013, we will see businesses move towards 'always on' and location-based offers."

"The ability to access deals that are specific to home town or city was always at the core of this industry; mobile has made it easier and more convenient to do that," says Prodromou. "Location-based services go hand-in-hand with e-deals and continue to offer huge potential for the industry. "Any business involved in the e-deal industry, particularly location-based deals, need to ensure that their retail channels are always open, whether they are accessed on a phone, tablet or PC. If the customer can't complete the purchase in a few easy clicks, they will move on."

Prodromou is convinced that the personalisation is the future: "Deal providers will undoubtedly get smarter and I foresee a model that doesn't rely on a time-limited scale, but a more targeted, personalised approach."

The Big future
Another development that could potentially be a saviour is Big Data. Figures within the industry say that
while many organisations still only use a small percentage of their available data, businesses will begin to focus on it more this year.

"2013 will see a shift as businesses begin to prioritise the role of data in their company's strategic planning," says Gerard Doyle, CEO of Discountvouchers. "Companies have begun to invest in better targeting, using the data they already have and improving it to provide a more personalised service."

Implementing Big Data allows merchants to target the most profitable areas for them, based on consumer behaviour. Companies that have begun using it are able to develop strategic marketing plans and avoid wasting money in areas that are less relevant.

"Big Data opens a new door for consumer measurement - understanding a consumers' direct impact on business - and completely transforms a merchant's ability to engage with consumers effectively," says Doyle. "Companies are now realising the impact Big Data can have on their marketing decisions. It can enable a business to understand consumers and measure their impact on a brand. Big Data analysis finally allows businesses to identify measure and effectively target consumers."

Prodromou adds: "Both LivingSocial and Groupon have a considerable amount of data on their consumers and it is only through using it that they will experience long-term success."

The daily deal approach is expected to become part of the overall marketing mix as the industry moves forward, with bigger brands predicted to integrate deals into their business plans instead of seeing them as an 'add-on' or an easy way to move surplus stock. And while many consumers are keen to save money they still need incentives in order to be drawn to deals.

"Consumers are and will always be deal crazy," says Prodromou. "The economic climate has conditioned us to look out for deals and coupons, but many now won't buy without some incentive. This is a trend that I believe will continue for some time yet.

"The e-deal industry will survive as it continues to learn and evolve from all the widely publicised successes and failures. I have no doubt that by bringing together deal providers across the world to collaborate on industry initiatives and standardise approaches, the e-deal industry will grow with integrity.

Source: http://www.cbronline.com/news/death-of-the-daily-deal-060313
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