Our 10 PREDICTIONS for 2012

So why are we publishing predictions late in February?

  • First, publishing them in late December or early January with ten thousand other people publishing their own predictions, well, not the best strategy if you actually want yours read and remembered.
  • After the hubbub of the holiday season and the start of the new year, a couple of months into the year gives a better perspective on how things will shape up over the course of the year.

As such, publishing prediction a couple of month into a year has served me well in the past. Here are some of our predictions for the remainder of 2012.

1. Less competition:

  • There are 150 deal sites in Canada now and 50 aggregators. Where 2010 and 2011 was a time for growth and excitement for these sites, 2012 will be a time for reality. There will finally be a lot fewer sites by the end of this year. I am personally familiar with at least 20 sites that are either selling or buying.
  • Margins continue to shrink and it is becoming harder and harder to gain the merchant’s attention. Building a deal site is easy. Having a profitable and growing business in the space is not. When deal sites are now only keeping, on average between 30-35%, well, not many can afford to grow.
  • More and more consumers are opting for larger or niche sites instead of smaller sites that have the same inventory.
  • Less entrants into this market….because it is damn expensive to get merchant inventory and even more so on attracting and keeping consumers.
  • Many of the smaller sites will simply stop operating, merge with other sites or continue to be small. My recommendation: merge with other sites or buy other deal sites to form larger more competitive deal businesses. If not, move on to another business. There are, other, easier business where a better ROI can be had.

2. Media companies opting for Aggregation: We have written about this before. Large media properties are seeing deals as a means to increase their consumer views. Thus, choosing to aggregate deals instead of running their own deals is making more and more sense to them. Consumers are going to deals sites anyway, why not have those same consumer stay on large media portals they already go to every day (Sympatico, Rogers properties, Post Media, Torstar, Astral, Sun Media/Quebecor, Trans Continental properties, Glacier Media, etc) Attention Media companies: Keep your audience with you, increase page views, advertising click throughs, etc..all by aggregating all deals on the market.

3. Niche sites, Niche categories: Canada is about a year behind the USA in this industry. As such, look for “niche” to be a strategy going forward. Existing sites will add niche categories to their inventory portfolio (Travel, Adventures, Family, Products, etc) Dealfind, Wagjag, Teambuy and others have already done so. As well, look for more sites to launch as niche sites instead of generic deal sites…targeting a specific category such as Travel, Family, High end, etc. These strategies have proven to be successful under effective execution in the USA and look for similar approaches here in Canada.

4. Large sites become ecommerce portals: The larger the consumer database, the larger the deal site, the larger their need for deal inventory. Some larger sites are no longer deal sites per se. They are more like ecommerce shopping portals. Teambuy, Wagjag, Dealfind, Tuango, and others are looking more and more like Overstock.com or Amazon deals than Daily Deal sites. By the end of 2012, look for some of these sites to be indistinguishable from other online liquidation shopping sites….offering a number of categories, products and services at great prices. At that point though, would they still be considered Daily Deal sites? Debatable.

5. Product Inventory rules…again.

  • For the Deal site: As per our previous post, product inventory is starting to dominate the pages of deal sites. The reason? Quite simple actually…deal sites need inventory and lot’s of it and it is damn expensive and a long process to convince local merchants to offer deals. Enter product inventory. No sales people to hire, no local merchants to convince, and as much inventory as you can handle. The problem is that most of this inventory absolutely sucks! Some deal sites, especially the larger ones look more like gadget and technology liquidation centers for cheap and low service products from overseas manufacturers. We believe that products most certainly have a place within the Daily Deal/Group Buying genre. However, the way deal sites are presently delivering and showing products is an absolute nightmare. Tremendous customer service issues, lot’s of returns and questionable product quality. As the year progresses, deal sites that promote product inventory will execute on this strategy better. They will provide a better user experience in terms of viewing products on the site, they will provide ways for consumers to NOT receive email alerts every single time a product is promoted online, and they will start partnering with better quality product suppliers. Regardless of if these improvements occur though, look for product inventory to play a massive part in this industry.
  • Warehousing: It is my personal prediction that a handful of deal sites (especially the larger ones) will actually start importing and warehousing products themselves. Yes, in order to improve on margins, this would be the only way and some sites are willing to take on the risk of importing, warehousing and actually selling or partnering to sell these products directly to their consumer database. Once this happens, these sites will have transitioned to full online retailers in addition to offering local deals. We’ll keep a close eye on this prediction, but we are confident that it will happen. Most likely in the USA first, but it will happen nonetheless. The margins in this industry essentially dictate that it must.
  • A manufacturers & distributors sales dream. If I were to consult with manufacturers of products, importers or distributors, then I would show them that providing their product inventory for sale through Daily Deal sites (especially the larger ones) is a tremendous strategic opportunity of selling their products more quickly and making the same or a bit more margin than if they followed the typical yet slower channels of distribution for their products. There are several manufacturers and importers who have leveraged the deals space to their great success already. Look for more and more over the upcoming years as product inventory infiltrates the deal space. Deal sites will become another viable way of distributing products, much like other large online retailers.

6. Better redemption: It is a hope that we see technology play a far bigger role in this industry. Redemption is still archaic; paper based vouchers, manual merchant verifications and other paper based processes are holding the adoption rate of deal sites back. Example: As soon as “card linking” technologies are used across the deals industry, then we will see a larger adoption rate of deal sites from the corporate sector. No one in a business meeting (or on a date for that matter) would every want to pull out a voucher before paying for a meal. However, if the offer was already paid for and credited to the user’s credit card, then the voucher system would be irrelevant and therefore a lot more people would use “deals” in public, especially restaurants. There are a hand full of sites using card linking technology in the USA but none in Canada as of yet. Other redemption technologies would include mobile vouchers as opposed to paper based.

7. Larger Brands: So where are the larger brands? It seems that 2011 was a “toe in the water” year for them. We believe that 2012 will be a turning point for larger brands and the agencies who represent them. In 2011, we saw the likes of Sears, Staples, Vie en Rose, American Apparel, Bluenotes, Yogen Fruz, Disney,  Kernels, Canadian Tire, several top hotel brands and a slew of others. For larger brands to participate further in this industry 2 things need to happen: First, deal sites need to get far more sophisticated in how they approach larger brands and their agencies. Their message needs to mature. For larger brands it is NEVER about giving a “Deal”. Learning more about the marketing and brand strategy of a large retailer will help Daily Deal site sales teams adopt a more confident approach. The second thing that needs to happen is for larger brands and retailers and the agencies that represent them to finally evaluate Deal sites in a less myopic manner. Brands worry about, well, their brand. Rightly so. However, deal sites can be leveraged in numerous ways that will not reduce the quality of that brand or promote discount marketing. Deal sites are a means to very attentive consumers. These consumers  will act when offered something interesting (severe discounting need not be what is offered). Experiences, special promos, inventory liquidations, limited offers, test items, etc. Large Brand/Retail marketers can and should leverage the power of deal sites far more than they presently do.

8. Mobile: Yes, purchasing deals through mobile will continue to grow and become a preferred means for consumers. However, I’d like to put the brakes on the industry’s expectations. The whole industry is NOT going mobile. Not even close. Email marketing is still in power and will be so for years to come. Certainly there are some types of purchases that are best geared towards a mobile user; such as restaurants for lunch, last minute shopping items, impulse buys. However, there are certain purchases that will simply not be ideal for mobile. For instance weekend plans, or travel plans. These types of purchases are made at home, in some cases with some research before purchase. So yes, more and more purchases will be made using mobile devices, the research proves that. But let’s not ignore the supreme power in this industry, and that’s email subscribers.

9. Quality:

  • Quality of products/service: Deal sites that survive will be those that focus on quality; in service and in the deals they promote. Offering an unknown tablet from an unknown online retailer leads to massive returns, customer service issues, poor quality ratings and distrust. Consumers can visit ebay, Amazon, Overstock.com, and about a thousands other sites for generic quality products. They do not need Daily Deal sites for that. However, Deal sites offering consumers something new, something interesting, something they have not seen or tried before at a great introductory offer all supported by reliable customer service will garner fans. If consumers can visit any deal site and see the same offers, then these sites cease to have any advantage….unless quality is a major strategy. Provide consumers with quality local offers, quality national offers, quality products and quality service and consumers will keep buying. Look for both deal sites and consumers to demand quality going forward. Consumers are tired of dealing with poor quality service and bad products and as is the case with any retailing experience, will gravitate to deal sites that can show them some love. Quite frankly, I believe some of the decisions in this industry surrounding poor quality has to do with the fact that there are so many Daily Deal businesses that are operated by people who have no idea of the retailing industry or retail etiquette or best practices. After all, the deal space is Retail. The faster the industry understands that deal sites are absolutely no different than online retail sites, then the better consumers will be in terms of quality service from these sites.
  • Quality of the audience for merchants. For some merchants, it is not about the quantity of consumers deal sites send them, rather it is all about the quality. Thus, look for segmentation to play a much bigger role as merchants mature in their use of deal promotions. More merchants will target deal sites based on the quality and segmentation of their database. Some sites do very well with the university crowd, while others do exceptionally well with the suburban Moms audience. At times, it is far better to get 150 quality consumers that match the merchant’s target customer than to receive 2000 consumers that only want a “deal” but will most likely never return.

10. Loyalty: We believe that the concept of loyalty is one of the most important factors  to the long term success of this industry. Daily Deal sites are, in fact, online retailers. Yet, they have not implemented what has worked in retail for decades and what has worked for top online destinations over the past decade…and that’s the concept of loyal consumers. Not just loyal to them but more importantly when it comes to local merchants, how loyal will consumers be to the merchant the deal site has just promoted.  Deal sites can certainly implement a loyalty program so consumers can be enticed to keep buying from them, but a more powerful loyalty program is if Deal sites figure out how to entice, motivate and convince consumer to go back and shop at the merchant they just promoted. There are a handful of sites that do this well in the US but rarely have I found deal sites in Canada focus on getting consumers to go back to the merchant the deal site just promoted. I believe this will start to change over the course of the year. It better. If not, some merchants will question the value of deal promotions as a marketing and advertising strategy for their business. It is worth repeating: deal sites better start thinking about how they can get customers to go back and shop at the merchant’s location.

 

Thank you for reading. As always, we do appreciate you sharing these posts with your network. More visibility for us translates to further posts for you.

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