Daily Deal Operators to Expand Service Offerings

It appears that analysts are keenly focused on  the daily deal phenomenon. Last week, I blogged about an Accenture report that projected a rosy future for daily deals.  Earlier this month, Groupon had a successful IPO. But some analysts see a troubled future ahead for this sector.

New research from Forrester, highlighted by the Wall Street Journal, finds that the best customers of daily deal sites are the same people that would have likely purchased items from the participating marketers anyway. Or put another way, the sites aren’t generating new customers for merchants. The Forrester data suggests that 51% of the daily deal shoppers fall into this category. Is this is true, sooner or later, merchants are going to ask themselves if “they’re just cannibalizing full-​price shoppers with the daily deals.” This theory seems rational when considered in terms of the Accenture report which noted that higher income consumers are far more likely to use the sites.

Other leading data points from Forrester include:

  • Over half, 56%, of subscribers are now checking their sites, looking for deals before they go directly to the retailers they would be patronizing anyway. The daily deal sites are continuing to enforce the notion of always buying on discount, a practice some merchants have been trying to get away from in order to improve profitability.
  • Consumers are tired of receiving so many emails from daily deal sites.

Forrester analyst Sucharita Mulpuru says a logical next step for these operators who need to continue growing to maintain profitability will be to broaden the scope of their services. These services might include running loyalty programs for smaller merchants or finding a way to charge marketers to be listed in their emails. There's little disagreement that these operators have had an impact on local marketing. As these operators adjust their business models, they could find new ways to further disintermediate the advertising marketplace.

[Source: Woo, Stu. Daily-​Deal Sites Face Problems Ahead. WSJ​.com. 7 Nov. 2011. Web . 14 Nov. 2011] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.