In the beginning, there was Groupon. Then, LivingSocial. Now, there are over 130 websites offering daily deals with huge discounts. If you’ve noticed that there seem to be more daily deal websites than you can count, you’re not alone. As The Vancouver Sun’s Tom Stein notes, just about everyone thinks they can make a daily deal site, but some are more successful than others.
When Todd Rideman first heard about Groupon, he figured he could do it, too. After all, what's so hard about putting up a website, offering a few deals each day from local merchants — like $20 worth of cupcakes for $10 — and then watching the cash roll in?
So Rideman poured $100,000 of his hard-earned money into his own daily deal site and, at the beginning of the year, launched WowWhatSavings, targeting the Boston area. He quickly learned, however, that building a profitable Groupon clone isn't as easy it looks.
"I was able to get the local merchants, but getting people to come to the site was costing a fortune," said Rideman. After six months, he had just a few thousand people on his distribution list. He has since morphed his business into a deal site for restaurants only, and has seen sales perk up.
So it’s a little harder than it looks, it would seem. And, as a new study notes, the business model, while great for consumers, is starting to lose traction with the businesses providing the cheap goods and services:
In fact, a new study from the Jesse H. Jones Graduate School of Business at Rice University found that one-third of businesses don't make money from promotions on Groupon and that 40 per cent of businesses said they wouldn't do a social promotion again. "An industry in which 2 in 5 customers are hesitant after a first purchase ... may need to modify its overall strategy," wrote Utpal Dholakia, author of the study.
Sucharita Mulpuru, an analyst with Forrester Research, isn't convinced that Groupon will remain the dominant player.
"Just because one company gets 50 million people on its list one year, that doesn't mean that next year someone else could not grow as rapidly," Mulpuru said. "Has Groupon fundamentally attracted customers that nobody else can attract? No, because they ask so little of their consumers — simply subscribe to a list. But by the nature of asking so little, someone else can come in and do the same thing."
You can read the full article here.