The Answer: A deals a deal, now go buy it and leave me alone!
This topic has come up often over the past few weeks and I, therefore, decided to touch upon it. Frankly, it is becoming less and less clear to consumers as to what constitutes a Daily Deal service, a Group Buying Service, a regular deals service, flash sales, Local offers, etc. Should they even care about the difference in each? Let’s try and shed some light on the subject:
The main difference as to how to categorize all these “Deal” services comes down to one thing: who delivers the product or service. Meaning, is the deal service delivering the product or service themselves as a store or are they sending the consumer to another business/store to redeem the product or service. Here is a break down of each:
Flash Sale service? (example Gilte Group, Beyond the Rack, fab.com, Nomorerack, One Kings Lane, Haute Look, Homesav, Rue La la, etc)
These sites offer consumers great deals and discounts on goods. Typically 30-70% off. Most categories are fashion items and home furnishings. These are products sold by the Flash Sale site; meaning they are manufacturer products that are being resold by the Flash Sales service.
Delivery Method: These services are member only online stores (membership is free…they want and need the consumer’s email). They are nothing more than an online ecommerce store with great deals. There is no shroud of mystery as to what they are. They are just like any other online ecommerce store, except how they sell is focused around the concept of time limited offers or while supplies last. They ship to the customer and have certainly taken a chunk of sales away from other online store or Local stores or Big box retailers. See revenue Graph.
Now, to make things more complicated, some of these Flash Sales sites also offer Local Deals. So should Flash Sale sites also be considered as offering Daily Deals? Sure…a deals a deal. But they are NOT considered a Daily Deal’s service because they sell and ship manufacturer goods themselves. The consumer buys from them and gets everything delivered by them. They are an online store. Whereas a typical Daily Deal service like Teambuy, Tuango, Social Shopper, Fabfind, Livingsocial sells vouchers for goods or services that must be redeemed or picked up elsewhere. They are not an online store. They do not ship…..at least not yet!
Group Buying Service? Group Buying is the concept where a minimum number of consumers must agree to buy a deal before that deal actually goes forward. The deal in this case is 50% or more discount to a local offer or online offer and always for a limited time, typically 2-4 days. Group Buying sites are also called Daily Deal services. This is what Groupon popularized and what others have copied. Group Buying or Daily Deal services sell a voucher that gives the consumer the right to redeem a product or service typically at a local retailer or online retailer for a specific price with specific terms. The consumer gets their product or service from the retailer that was promoted and NOT from the Group Buying or Daily Deal service. The Group Buying or Daily Deal service is therefore not an online store in comparison to Flash sales service. Over the past year we have seen more and more Group Buying Sites remove the minimum requirements for a sale to go through given that they always meet the requirements. As such, “Group Buying” has become irrelevant. Living Social, for instance, has never had a minimum requirement for a deal to “tip”. What is relevant is how large the database is of that site and how much will they buy. Daily Deal is relevant, Group buying, not so much any more. When a site is described as being a Daily Deal service, that is synonymous with a Group Buying service.
What is a Daily Deal? A Daily Deal is simply an amazing offer, typically 40% or more, that is offered to the consumer for a limited time or limited quantity. It can be offer by anyone that has consumer reach. Retailers can also offer their own Daily Deal direct tot heir consumer database.
So what is a Daily Deal Service? Ah, a Daily Deal service is a service that specifically offers Other Retailer’s Deals to consumers. Same thing as Group Buying Services accept no minimum requirements to be met for the deal to move forward. Daily Deal services offer deals at 40% off or more, typically 50% and always for a limited time frame 2-4 days. Daily Deal services are NOT ecommerce stores like Flash sales services, or other “discount stores” like Overstock.com. The reason is because they send consumers to the retailer to redeem the offer, Consumer don’t physically buy anything from the Daily Deal service and don’t get anything shipped to them by the Daily Deal service.
Local offers? Local offers was the premise of the Daily Deal/Group Buying movement. Finally a way for Local merchants who have no internet presence or not much of one and who cannot sell online now had the ability of connecting to a large audience by promoting their goods or services through a Daily Deals service. The concept has proven to work fabulously well in terms of driving traffic and driving an audience to the retailer. (how retailers and deal service profit from that traffic is a different blog post!)
Now, more and more Daily Deal services are offering online daily deals as opposed to just Local Deals. Online Daily Deals are simply daily deals that the consumer can purchase from an online store or destination. Again the daily deal service sending consumers elsewhere to redeem their deal.
Online Offers? So Online deals or Online offers are simply deals from online stores. They have been around for over a decade. They are typically 10-25% off..rarely go over this percentage and are usually from large online retailers such as the GAP, Old Navy, DELL, Constant Contact, Chapters, etc, etc. These deals have typically been promoted through affiliate networks and online deal and coupon sites such as RedFlagDeals and the like. Is an online deal also a daily deal. They can be, but they need to offer 40% off or more and have a short time limited offer.
So put all this together and what do you have? A mish mash of deals promoting to consumers CONSTANTLY! So which succeeds? Well that question is actually easy to answer. The service with the largest distribution to consumers succeeds. The more consumers see a deal, the more likely they are to buy it…especially if those consumers are looking for those deals. An average deal promoted on a service with a very large audience of consumers will sell more than a great deal on a service with a small audience. The audience is the key…both in terms of size and quality.
- Daily Deal sites promote many local and national offers that cannot be found elsewhere. Most at 50% off or more.
- Flash sale sites offer 50% or more deals on your favourite fashion and home brands.
- Coupon sites offer ongoing deals for online shops but usually only at 5-20%
- Daily Deal sites help with customer acquisition and advertising. They have proven to drive demand and should be a part of your advertising tool belt and evaluated much the same way that TV, Radio, Magazine, Newspaper or Online advertising is used for your business. Measure the ROI and compare based on customer acquisition.
- Flash sale services do not typically work with merchants
- Coupon sites and affiliates have been around for ever but do not work as well for local sales..especially not now
Going forward, the “Deals” space gets more confusing. Traditional Daily Deal/Group Buying Sites are promoting more and more online offers and some are actually taking on inventory and selling direct to the consumer. In that case, are they still deal sites or are they an ecommerce store or flash sales store.
Daily Deal sites are simply a manner if transacting between consumer and merchant. They are an effective distribution model. This model evolve. Credit card companies, for instance will distribute deals automatically based on your consumption patterns, no coupons, no redemption. Corporate Incentive program offering deals to the millions of employees in their distribution makes sense. Large media portal promoting aggregated deal always makes sense. What will remain constant is the need for merchants to promote themselves to consumers, for manufacturers to promote themselves to consumer and for consumers to find stuff to buy. How these three groups find each other will always be an ever evolving field.
In terms of the deals business, remember what was written at the beginning…. A DEAL IS A DEAL. The consumer really does not give a SH#! what that deal is called. (flash sale, daily deal, etc. ) The consumer cares about the quality of the deal, the availability of the deal, the opportunity to get the deal and the ease at which they can redeem that deal.