Death by a thousand cuts for Daily Deals sites

Daily Deals websites have been a feature of online retail for some years. Pioneered by Groupon in the US this area quickly grew into a red hot part of the market as a host of me-too propositions appeared and wooed shoppers with this new way of buying.

But it has gradually died a slow death. Groupon has been on the downhill slide since it spurned a multi-billion buyout offer from Google and instead listed on the US stock market at a price of $20 per share in November 2011. It presently languishes at less than $3 and has just announced the appointment of a new CEO. It has also been closing down many of its operations outside the US.

Amazon was one of the copycats with its version of daily deals – ‘Amazon Local’ – that is just about to be scrapped in the UK ahead of Christmas. So what exactly happened to this once buoyant part of the market?

As well as deal fatigue by customers whose email in-trays quickly became full of daily offers – some of them better than others. The dearth of deals as good as those originally offered by Groupon et al was also an issue.

This was a result of the realisation by retailers, restaurants and other business owners offering knock-down goods on the daily deal sites that the economic rationale for taking part simply didn’t stack-up. The idea had been that offering discount goods (at loss-leading prices in some cases) would result in some of the buyers returning at a later date as full-paying customers.

The reality was that this simply did not happen in sufficient numbers to justify taking part. Many daily deals shoppers are deal junkies who are only interested in the next cut-price offer. And in some cases – specifically involving restaurants – the deals related to lesser quality offerings such as limited option lower-cost fixed menus and smaller portion sizes etcetera.

None of this exactly conveys a great message by the businesses involved and further reduces the chance the customer will return to them at a later date. It’s a virtuous circle of decline.

As Groupon continues to search for a new business model that helps justify its existence, and Amazon pulls the plug on its efforts, the end of the once ground-breaking daily deal providers is nigh.

Glynn Davis, editor, Retail Insider

K3 Retail deliver multi-channel solutions that enable retailers to create joined up shopping experiences for their customers whether they choose to buy on-line, direct, in-store or via mobile. It has over 20 years’ experience delivering award winning solutions, to more than 175 internationally recognised retail brands.