eCommerce and Daily Deal Platforms, just getting started

How do I even start this post? And why is it being published on a Friday of all days? (just could not get it out sooner in the week…..labor day, Quebec Elections, Back to School and a variety of other poor excuses)

The objective of this post is to highlight what we see coming in the Deals industry in terms of Commerce Platforms, in terms of the ability to launch a Deals Program and the ability for consumers to gain access to even more great deals.

In order to operate as a Daily Deal provider, you need several technology elements. The most important being the platform you will be using. There aren’t as many choices, good choices, as you may think. We wrote about this earlier on in the year. Here is what we are seeing and our opinion surrounding the Deals Platform market.

Here are the options available in order to run a Deals program as an exclusive Deals Provider:

  • build the entire platform yourselves (not recommended unless you already have the funding and technical depth to do this and sustain it, plus it is expensive. This industry is about sales, not about technical development…save those costs and headaches and place them elsewhere)
  • Get one built from a provider: (same comments as above)
  • Use one of those inexpensive off the shelf/white label Deals platform (most of these applications were built overseas and my team has yet to see one that works very well and has no issues as your sales grow…and good luck getting more urgent features or urgent fixes from a “team” overseas. Placing your business’s livelihood in the hands of someone who built the code overseas is simply foolish. However, there are some sold locally in North America that are inexpensive enough to satisfy the small Daily Deal provider, and those seem to have satisfied the smaller provider. Although these providers need to invest in web design because they all look weak)
  • Use a white label version from a proven and market leading enterprise platform provider. (Top Providers in Canada are Nimble Commerce, Group Commerce and Deal Current, that’s it). Although the cost is higher for these platforms, what you get in return is an enterprise class platform, service, industry leading and relevant features and a platform that will develop its features as the industry matures. More on this category later in the post)

That’s it. These are the choices. Our typical recommendation is usually to choose from Nimble Commerce, Group Commerce or Deal Current. However, the industry leaves out one MAJOR option. One option that will enable the Deals space to further expand into areas presently not occupied. Once this option is made available, consumers will gain access to thousands more deals from thousands of online commerce destinations.

Here is what is missing and what is absolutely needed and coming:

At the moment, Deal Platforms are built assuming that the Deal Provider is running a full blown Deals program. Deals every day, sales staff, multiple cities, etc. Thus, platforms like Nimble Commerce, Group Commerce and Deal Current are appropriate and very effective. And there lies the major issue and the major opportunity.

How about if a Provider is NOT operating a full scale Deals program. How about all those tens of thousands of online stores that wish to run their very own Daily Deal promos but find it cumbersome or technically unfeasible to do so with current deal platform pricing and features. Example: there are thousands of small online stores across North America, be it a jewelry ecommerce store, cloths, sports, Health & Beauty, local and national, etc. I am fairly certain that many of these would love to run a Daily Deal promotion for their audience/customers on some key products or services they are selling. But using present technology and features from existing Daily Deal Platforms makes it ineffective for them to do so. It is just too expensive and too complicated to operate a Deals program. These online stores already use an ecommerce platform and they pay good money for it. If they are to run a Daily Deals promotion using an existing Daily Deal platform, well, a few problem occur:

  1. they would need it integrated with their existing ecommerce platform or else it would be too complicated and an administrative nightmare to handle. Remember, these are small business owners
  2. the price of the Daily Deal platforms would be prohibitive and therefore not used. Regardless of the Deals platform chosen, it would cost a few thousand dollars in setup fees and once sales start, a % of sales between 5%-8% of gross sales would be the cost of using the Deals platform. This cost may be reasonable for a Deal Provider with a full scale Deals program, but is absolutely not in the cards for a small online business owner. It is just too expensive.
  3. Ultimately, these thousands of online stores would want the Daily Deal functionality available INSIDE their existing ecommerce platform…..

Given the above, where is the opportunity?

Here it is:

Point #3 above says it all. Thousands and thousands…seriously…thousands of online stores and online destinations would provide a Daily Deal promotion to their customers if that functionality was already included inside their existing ecommerce platform. Platforms like BigCommerce, Shopify, Vendio, Volusion, 1shoppingcart, and dozens of others have thousands and thousands on online stores and destinations using their ecommerce platforms to sell stuff to consumers. These platforms have everything that a small online merchant and, in some cases, larger merchants need to run and promote their online store. These are sophisticated ecommerce platforms that have been built and scaled over the years to offer the ability for online merchants to focus on sales and marketing and not on technology. Where ecommerce platforms cost tens of thousands and in some cases hundreds of thousands of dollars to have years ago, now simply cost anywhere from $25-$150/month to use and operate. The one thing these platforms do not have is the ability for their customer to run a Daily Deal promotion. They just have not embedded that functionality into their platform…….YET.

Once a Bigcommerce or a Shopify, two of the leading ecommerce platforms on the market, embeds Daily Deal functionality into their platform, it will enable thousands of online stores and destinations to be able to run Daily Deal campaigns. Big Commerce just received another $20 million in funding this week, no totaling $35 million in funding, and they can certainly add a stright forward Daily Deal feature to their platform. And that is great for consumers, great for merchants, and great for the platforms. Once this happens, Daily Deals will be even more available to consumers than they presently are; enabling consumers to follow their favourite online stores for great deals instead of waiting to see if a Daily Deal Provider will promote that same product or service on their site.

Here is what the co-founder of Big Commerce, Eddie Machaalani, recently stated:

“E-commerce is already booming and we’re really focusing on how to help our clients sell more while leveraging affordable online channels that drive qualified traffic,…Small and medium businesses shouldn’t need a degree in design and web development to run a successful online store. They want it to be easy and intuitive. We’re radically simplifying the e-commerce experience, enabling the small business not just to compete with larger competitors, but win.”

If Big commerce or Shopify and other adopt Daily Deal features into their platforms, will this be a problem for existing Daily Deal platforms? Yes, I believe it will cause certain pain and competition. Especially from those companies and entrepreneurs who do NOT want to operate a full Daily Deals program. For enterprise class Daily Deal programs, go with Nimble Commerce, Group Commerce or Deal Current in Canada. (each has their own advantages or disadvantages by the way, contact our office for further evaluation). But for online stores who already have a world class ecommerce platform such as Big Commerce or Shopify, then it does not make any sense to go with anything other than their existing platform……that is if their platform develops a Daily Deal feature.

 

How big is the opportunity?

No one can truly say, but some of the following numbers can help determine a path.

Total retail sales, which includes e-commerce sales, increased 7.9% in 2011 and totaled $4.2 trillion, according to the Commerce Department.

U.S. e-commerce sales totaled $194.3 billion in 2011, up 16.1% from $167.3 billion in 2010, according to the U.S. Commerce Department.

When you exclude sales in categories not commonly bought online—automobiles, fuel, grocery and foodservice sales— e-commerce accounted for 8.6% of total retail sales during the year, up from 7.6% in 2010 according to Internet Retailer.

eCommerce is continuing to take a larger and larger portion of total retail sales. Daily Deal providers accounted for $2.3-$3 billion in sales over the past year in North America. That number is NOT Daily Deal sales, just sales from Daily Deal Providers. Sales coming from Daily Deal promotions through online stores are NOT part of this number and THAT is the number that will significantly jump if ecommerce platforms like Big Commerce, Shopify, Volusion and others include Daily Deal functionality in their offering.

Here is an interesting point:

  • There are eCommerce platforms like Big Commerce, Shopify, Volusion and dozens of others
  • There are Daily Deal Platforms like Group Commerce, Nimble Commerce and Deal Current
  • There are Flash sales platforms used by Beyond the rack, Gilt, Ideeli, etc
  • There are large enterprise ecommerce platforms for much larger online stores.

As such, should an entity start consolidating some of these platforms? Should Group Commerce buy a Shopify?

Should a Big Commerce buy a Deal Current? Should some merge? It is inevitable. Consolidation in the platform space will also happen.

So, we rambled on quite a bit in this post. Essentially stating that the continued growth of online shopping and the possible adopting of Daily Deal features on ecommerce platforms will create opportunities for the Daily Deal concept to be adapted to thousands of online stores…….significantly expanding the reach of the so called “Daily Deal” to millions of consumers. That, is good for the whole industry.