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Daily Deals Not Dead

Posted by Michael Bloch in ecommerce (Friday September 21, 2012 )

The rumor of the demise of daily deals appears to have been exaggerated. If anything, the amount spent on daily deals, instant deals and flash sales has skyrocketed this year.

According to BIA/Kelsey, U.S. consumer spending on online deals will reach $3.6 billion in 2012, an increase of nearly 87% over last year.

However, growth is expected to slow substantially next year (23%) then drop to mid-single-digit growth in later years. This will still translate to deals spending reaching a massive $5.5 billion in 2016.

But not all merchants who participate in the daily deals scene have success and BIA/Kelsey says deal conversion rates may be suffering due to over-familiarity and the market may be nearing saturation.

Daily deals really got their start in 2008 courtesy of Groupon, which evolved from ThePoint.com. A colleague was involved with ThePoint at the time and I remember him being particularly excited about the concept – and it seems that excitement was certainly justified.

It wasn’t long before daily deals sites sprang up everywhere. Even now, I still see ads nightly on TV spruiking online deals for stuff that most people will never need. They’ve certainly done a lot for non-essentials spending and rampant consumption.

If you’re considering running deals through one of the major players, think about this very carefully – take a close look at your profit margins. While a deal that flops can be expensive, a deal that is massively successfully can be even more so if you’ve made a mistake when crunching numbers.

There have been a few cases when smaller merchants have been inundated with orders. The impact on customer service has left them with a bit of a black eye and a big hole in their bank accounts. For example, this article outlines the story of a small business that wound up needing to seek $150,000 to cover its costs as a direct results of a deal it offered.



 

 
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