Are daily deals losing appeal?
Daily deal websites may be losing their power in the New Zealand retail market.
Over the past five years, the number of daily deal sites has exploded. GrabOne, TreatMe and Groupon are some of the most high-profile, but there are almost 50 other options, including sites tailored specifically to types of products or experiences.
While they were once able to command the attention of large numbers of people, analysts say they are now losing influence.
The sites have been in the news last week after Auckland customers complained they were shouted at when they tried to redeem GrabOne vouchers at a pizzeria.
Businesses often use the sites when they want to get attention for a new product or make themselves known to customers. They site gets a percentage of the cost of the deal as commission.
Those spoken to by Fairfax said they were paying between 20 per cent and 35 per cent to run a GrabOne deal but a spokesman said there was no firm rule. ‘‘We actually use a cost up method to ensure our merchants cover their hard costs for the goods and services they provide, and that’s how we arrive at a commission percentage. So the rate can vary from business to business and offer to offer.’’
Retail consultant Chris Wilkinson of First Retail Group said some businesses – such as those offering photo canvas printing – had made daily deals their whole distribution channel.
But he said they did not work for a lot of businesses. ‘‘It’s a very different customer that tends to use these. It’s rare that the goodwill is enduring.’’
He said the sites were often used by businesses in the ‘‘throes of desperation’’ who wanted a quick way to get a cash flow injection. ‘‘It rarely is.’’
The ‘‘window of opportunity’’ for deal sites was closing fast. ‘‘If it hasn’t closed already.’’
Customers had become overwhelmed by daily deal sites and were disengaging en masse, he said.
Valentyna Melnyk, marketing professor at Massey University, said the sites had grabbed attention when they first launched because there was an element of surprise. ‘‘You never can predict what comes next, there’s the idea of urgency, and scarcity. It’s a psychological mechanism, this idea of a closing door is extra motivation to secure a deal.’’
But she said they were likely losing some of their power because there were so many sites operating.
New Zealand consumers were also conditioned to look for promotions far more than shoppers in other countries, she said. ‘‘We’re trained to only buy on promotion or discount. If you took it to a country such as Belgium where promotions are regulated, this type of site would be much more successful because promotions are rare. But in New Zealand if you miss out on something you should still be able to wait until Labour Weekend and get it at the same price.’’
She said even compared to Australia, daily deal sites would probably be less effective here.