There’s been a lot of buzz around the recent turnover and consolidation of several daily deal websites. Some sources have predicted a collapse of the industry while others remain optimistic about it’s future growth. The rapid growth of the number of competitors into the market is not sustainable but there still seems to be lots of room for growth in the industry (see Don Young Jr’s Daily Deal Media Article: Daily Deals Market not even Close to Breaking Point). Despite this, some sources estimate that roughly 20% of these sites have either thrown in the towel or been acquired by another company within the last year.
The huge success of Groupon in North America created a too-good-to-be-true gold rush of entrepreneurs and publishers into the emerging industry. Relatively few were prepared to compete with the large budgets that Groupon and LivingSocial could afford to pay for customer acquisition. Groupon and LivingSocial were quick to implement aggressive growth strategies that built a lot of initial hype that convinced the early adopters to try out the concept of Daily Deals. There have been several other successful companies to follow but the best recipe for success is to be innovative and attentive to the needs of customers. Building brand loyalty is key to retaining customers and there have been a wide variety of strategies and attempts by the big players to do so.
At the end of the day, an individual shouldn’t care whether a 50% discount at their favorite restaurant is being offered from Groupon, LivingSocial, or another reputable deal site. The relatively low switching cost (an email address and your credit card information) makes it easy for users to try another daily deal provider. Users who sign up to numerous deal sites are soon to find their inboxes flooded by numerous offers every day. When this happens, the need to unsubscribe or migrate to a new email address emerges. By using The Deal Pages, you can find all of the offers from the top daily deal sites without having to go through numerous emails to ensure you don’t miss the occasional deal that you might want. These factors hurt the business model of daily deal sites since it increases the attrition rate of their users which lowers the average user’s lifetime value and lowers the price daily deal sites can afford to pay for a new users.
One thing is for sure, the Daily Deal Market is changing. By many standards it is still in its infancy and given recent advances in technology and consumer trends, it is likely to continue well into the future. Boyan Josic, CEO and Founder of Daily Deal Media recently wrote an article about his view on The Future of The Daily Deal Market in which he shares his ideas as well as the ideas of Dean DeBiase, Chairman and CEO of Entertainment.com. Josic and DeBaise’s message was simply “despite what pundits have been saying, the Golden Age of the daily deal is not over, in fact, it has not even begun.”
One trend I expect we’ll see continue into the future is the shift towards deals that can be redeemed instantly. Currently, the majority of offers from daily deal sites require that you wait one day or more before you can redeem your voucher. This reduces the effectiveness of the “flash sale” model that helps drive the consumption of daily deals. Recently, Groupon, LivingSocial, WagJag and several other providers have begun experimenting with deals that can be redeemed immediately after they are purchased. For the most part, these “instant deals” are typically in the 15% – 30% discount range, which is less than their standard offerings of 50% – 90% off. These deals are often promoted through restaurants or service providers who are looking to increase their sales during slow business hours. I expect that as the market matures, we’ll see a growing trend in significantly discounted “instant deals.” This is especially true with the maturation of the secondary market. Stay tuned to The Deal Pages for some exciting new features related to these growing trends in the Daily Deal industry.
If you have any thoughts about The Daily Deal market and the future of the industry, don’t hesitate to share them with us in the comments section below.