With the success of the flash sales business model and the factors that contribute to their ongoing success, this has brought out a never-ending supply of companies who want to be the next leader in this fast-growing e-commerce segment. Other eRetailers were looking to experience the same success, but unsure how to enter the market. They knew consumers were spending their money quickly, so it wasn’t long before entrepreneur introduced a new e-commerce niche in the mix. This became known as the daily deal model where vendors partner with the site in order to showcase their sales and then the site takes a small percentage of the earnings. Customers that sign up may receive an email of discounted items or they can browse a website with a variety of deals to choose from, all with a relatively short timeframe for buying.
The History of Daily Deal Sites
Groupon was one of the first daily deal sites attracting the business of retailers hoping to increase their sales by promoting brand awareness and marketing. Groupon would reach out to local and national businesses offering discounted products and services while earning a profit on the amount sold. Initially, the service was only offered in Chicago, where its headquarters are, but with success and high demand, they expanded quickly. After the first year, they were in over 50 states, had over 500,000 members and achieved a profit of over $30 million. Now in more than 50 countries and over 80 million subscribers, Groupon is known as the trailblazer of the daily deal industry. Today they have a handful of peers, including Living Social, competing for the same consumers while trying to offer a variety of products and services at better deals.
Key Traits of Daily Deal Sites
Flash sales and daily deals do have a similar theme; they offer products at a discounted price to the consumer, while being able to generate profit from the amount of goods sold. However, there are some key traits that daily deals have that differentiate them from flash sales:
- Service-Industry Target: The first businesses to achieve great success with daily deals sites were the restaurants. For example, consumers would purchase a Groupon for $25 and receive $50 worth of food and drink at that specific restaurant. This success spread to other service-based retailers, leading to the addition of spa services, hair and beauty packages, family fun outings, as well as consumer products, apparel and so much more.
- One-Day Only: As the name implies, daily deals sites are known for offering products and services for one day at a time, as opposed to a week or month long time frame. With such high demand for certain products, the most successful daily deals sell out quickly, within the 24-hour purchasing window. This idea works well with consumer because they feel as if they are getting the best price for the goods and are part of a “unique” group that was able to snag the deal before anyone else. There are some daily deals sites that offer certain items available longer than 24 hours, particularly around the holidays. Many retailers will allow them to post their items for sale starting on Black Friday and ending just before Christmas.
- Local Selection: A very unique trait that daily deals have is that the selection of goods and services change depending on your location and the retailers utilizing their service. A leading success factor, this business model is able to cater specifically to their consumers depending on where they live or might be visiting.
- Limited Supply: Retailers who partner with daily deals sites can limit the amount available for sale so that there is never an unlimited supply. This keeps the goods in a consistent state of demand, leading people to purchase quicker instead of price shopping. This also allows the retailer to control the volume of the discounted product or service, limiting their exposure to lower margins and allowing them to offer higher levels of discounts.
No matter the platform, the goal of these flash sales and daily deals sites are to sell out. Whether they have a 24-hour shopping window or a week, both segments attract millions of consumers hoping to find the best deal possible. They serve a great purpose for retailers, to increase sales and promote their brand, while offering consumers bargain prices for their products. Based on the idea that a short-term sales event drives consumer interest, both of these business models are contributing to the e-commerce retail growth in today’s world.
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