As we head into the middle of the summer we are starting to build up our article inventory once again. Our posts have been lean over the past month or so not because there hasn’t been anything to write about, but because we have been quite busy in the field. As we head towards the back to school and back to work season look for more articles to be posted once again.
This post will focus on “I told you so” concerning eCommerce and the Daily Deal industry.
Throughout several posts over the past year and throughout many consulting assignments or advisory roles, we have always stated that it is inevitable that certainly Daily Deal companies launch a full blown eCommerce initiative.
As Deal companies increase their consumer database size and as more and more revenues are needed from different sources than local merchants, Deal companies have no choice but to mature their service. As such, the first step was offering product deals, the next step was REALLY offering product deals. This has morphed into relationships with importers, wholesalers, manufacturers who see the Daily Deal channel as a viable distribution method to get their products to market directly in the hands of consumers. And Deal sites find it a lot easier to promote products rather than local merchants. (other than the customer service issues 🙂 ) So what is the next step?
We have written before that if Deal companies want to offer products in an effective manner, want to reduce the customer service issues they have in selling products, then they should truly dive into the experience and be responsible for the entire transaction instead of “passing” it off to a so called third party online “store”. Instead, Deal sites should launch their own eCommerce service. Become the destination, own the customer, own the shipping, own the customer service and stop pretending that issues surrounding selling products is not their problem but the problem of the fulfillment center. That’s a cop-out. YOU, the deal site, should be responsible and accountable to the consumer, NOT some made up site from the fulfillment center or wholesaler.
In July, Living Social dove head first into the product deals game and launched their very own eCommerce store. Although not yet available in Canada. This is significant because of one thing. The shopping cart and the accountability to the customer. They are stating that THEY are responsible, they are the store, they are the main destination for the customer. Very much like Overstock.com or Flash sale sites like BeyondtheRack, Fab.com, OneKingsLane, nomorerack.com, etc, they all own the customer, they all take responsibility for the transaction, for shipping, for customer service. Deal sites who go big on products should do the same.
Going back to Living Social for a moment: why is their eCommerce service more impactful than that of Groupon’s or other Deal sites? It comes down to one thing: They have a shopping cart, therefore selling directly to the customer, and most other simply do not. Groupon sells tens of millions of dollars worth of goods every month, but they do not have a shopping cart front and center for that service, insinuating to the customer that they are just selling the offer to the consumer instead of actually selling the good. (Groupon actually ships goods themselves and also has drop ship arrangements) But Living Social’s experience is very transparent. We have an eCommerce store, come and buy. There is no insinuation that those goods are coming or being sold by some other entity. Living Social owns the experience. That is a very good thing.
SO, WHAT OF CANADA?
Let’s take a look at the some Canadian Deal sites and determine which would do very well owning an eCommerce destination.
1. Teambuy. They already are a destination site where consumer go to shop, not just to get deals. Launching an actual eCommerce store and owning the experience would make sense for them. Although the name Teambuy may not adapt that well to an online store given that their is no Team Buying any longer (unless they bake that in)
2. Wagjag. They also sell plenty of products and are also a shopping destination. They would also do well integrating their eCommerce store with other Torstar properties.
3. LivingDeal. They have been selling products and online deals for some time. They essentially are already a product deals service. They should just take the next step and own the whole experience. This would enable them to offer a more diverse product line.
4. Dealfind. More and more products power Dealfind’s sales. Given their recent launch of a Jewelry category it would make sense for them to own the whole eCommerce dynamic. The question is, would they want to? Operating an eCommerce service is NOT the same as operating a Deals service. It can be easier and it can certainly be more problematic in terms of inventory management. More on this later.
5. Buytopia. Yup, them to. I believe they would do very well with an eCommerce strategy.They are aggressive, are growing nicely and know online marketing.
6. Tuango. Although Tuango dominates Quebec, they have done so by sticking to the fundamentals of the Daily Deal/Group Buying business, and that is service Local merchants and local consumers with great quality local deals. Their revenues have not come from many product deals. So their upside is actually huge if they were to launch an eCommerce service for Quebec. In fact, it will probably be the number one eCommerce store in Quebec in a very quick period of time given the size of their database and their reach across the province and the fact that there aren’t may top eCommerce destinations in Quebec and in French. If they do launch an eCommerce service, then expect it to be focused on French, focused on provincial culture, local suppliers, local media, and the fact that the founders of Tuango also have eCommerce successes and experience helps. So I’ll put my money on Tuango leading here as well if they choose to venture into eCommerce.
The MAJORITY of eCommerce leaders in Canada are actually American brands. A pity. There simply aren’t many Canadian based retailers that drive all that much revenue from Canadians buying online. There are many factors for this reason that we will not go into here. Despite this, Canadians really love buying online. See our last post on the eCommerce industry in Canada. The following are the top eCommerce destinations in Canada owned by a Canadian company. Not many:
The Bay, Coastal Contacts, Chapters/Indigo,, ice.com, well.ca, The Shopping Channel, Beyondtherack, Mountain Equipment Coop, Lululemon, Aldo Shoes, Roots.
That’s it. The Bay did about $200mill, Coastal, about $177mill on the top end. And Roots about $16mill on the low end of this list.
Given the above numbers, and the size of the overall Canadian online shopping industry, I reiterate that if the likes of Teambuy, Wagjag, Dealfind or Tuango launch an eCommerce service, and promote products that consumers are excited about, then these Deal companies may very well be among the above list of top eCommerce stores in a very short period of time.
Now, what it takes to build and grow an effective and profitable eCommerce business is another story; one that will be written about in future posts. (Think inventory management and operational effectiveness and online conversion mastery.)
The countdown is officially on as to who will be the first Daily Deal site in Canada to launch a full blown eCommerce service. (when that happens, should these companies still be considered a Daily Deal service?…I’ll get back to you on that one)
BTW. Now would be a perfect time to start the process of launching an eCommerce initiative. This way it will be ready for the holiday season of November and December. Waiting another month or two will be too late.