Many argue that the barriers to entry in the daily deal space are so low that anyone with a warm email list and shopping cart can compete. This thinking has been tested over the past several months by literally hundreds of vendors, and it is obvious that certain characteristics of an email list matter more than others. Perhaps the most important characteristic of an email list is whether or not it is used to “frivolous” spending and impulse buying. To make this point, I’ll provide two quick examples: TravelZoo and Prospectiv.
Ever hear of Travelzoo? They are a travel website that sends travel deals to more than 20 million subscribers. Over the past few months, they started introducing these subscribers to daily deals. The result has been almost instant success. These consumers are primed to look for a great offer, and they trust Travelzoo to deliver those opportunities. They’ve already sold thousands of deals, and many offers have outperformed Groupon and LivingSocial in volume and gross.
Ever hear of Prospectiv? They are a private company in Massachusetts that works with a number of major CPG and retail brands to drive in-store purchases through targeted delivery of coupons and vouchers (primarily to women). They recently launched Eversave — a daily deal business. On a panel at a recent conference, CEO Jere Doyle said that only 20% of his discount-seeking audience has also bought daily deals on Eversave. The revelation is that people who are obsessed with saving money rarely splurge on the kind of lifestyle and entertainment deals showcased by daily deal vendors. This finding was echoed by others in the coupon and discount ecommerce market: James Green from Travidia that runs “FindnSave” for local publishers and Brian Costello GM of The RedPlum Network.
This may not sound like a groundshaking observation, but when you realise this dynamic, it has a number of important implications for determining who is best positioned to continue to serve daily deals with high margins. It says Priceline, Kayak, Expedia, and Travelocity should be thinking hard about entering this space. It says newspapers shouldn’t jam daily deal full-page ads in their print circulars to upsell local merchants. Perhaps most importantly, it says Andrew Mason shouldn’t have his photo taken in front of thousands of coupons — while the photo is really clever, it doesn’t reflect what his audience is actually doing.