According to the E-Commerce Times, the existing model for "daily deals" sites - such as Groupon and KelkooSelect - could be endangered. What, then, is the issue? Simple, according to the E-Commerce Times: merchants aren't making anywhere near enough money from them. These sites are a relatively new phenomenon that have gained momentum only over the past four or five years. At first, the model seemed like a no-brainer: drive first-time customers en masse to sites via blanket discounts, and increase public awareness of the brand severalfold in one fell swoop.
However, merchants are starting to question how much they are actually getting from these sites. As a consequence of this, restaurants have decreased the number of coupons on daily deal sites by 40% in the last year, and salons, spas and other prolific health-and-beauty industry deal providers have decreased offers by about 18%. The biggest issue is the fact that, whilst first-time customers do arrive at the merchants' sites in droves for that first deal, it is very difficult to entice them back to pay full price for a product or service afterwards. According to a study by Rice University in the USA, only 20% of coupon redeemers become repeat visitors to a merchant's site. How can these challenges be addressed?
Ultimately, daily deal sites need to make sure they are making money for the merchants. If not, the model will eventually go into extinction. The distribution and availability of deals must be better targeted and controlled so that only the best customers - those who are likely to spend more money after the first deal - are trafficked. Those repeat customers should be rewarded for their purchasing history - deal sites should no longer use blanket discounts to target any customer out there. Merchants profit from acquiring a loyal customer base - if this is not the case, they begin to lose more and more money, offers become sparser, and customers quickly lose interest, meaning much of the local marketing successes won over the past few years will become a thing of the past.
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