“Daily Deals” Model Emerges As Hot Promotion Proposition

As consumers continue to keep a keen eye out for values, retailers are looking to the “daily deals” concept for guidance to increase profit and gain customer loyalty. Built on the model of creating urgency among consumers, several new online sites have shown substantial growth by offering discounted deals or special selections that last for a limited amount of time. Groupon, an early leader in the deal-a-day scene generated 4.6 million unique visitors a month, according to web analytics company, a one-item daily deal site offers site visitors the chance to shop a 24-hour auction, or until the item’s stock is depleted. At 11:59 every night, a new auction begins. Although its variety of branches shirt.woot! kids.woot! sellout.woot! and wine.woot! create room for niche audiences, the site fosters a “shopping competition” to vie for Internet deals chosen by users. The shopping objective? To purchase the item before the main page displays the “SOLD OUT” sign.

With the competitive spirit still thriving, other online retailers like Rue La La and Gilt promote a VIP experience for shoppers, by presenting high-end, discounted coveted fashion offers. Both sites display a catalogue of “deals of the day” that only last a maximum three days and 36 hours, respectively. The easy site navigation, impressive variety of merchandise, designer brand names and up to 70% discount rates give online shoppers and “fashionistas” an offer they can’t refuse. Morever, the sites boast a social aspect with an invitation only approach.

Potential users must fill out an information form to request access to the site. Once in, shoppers gain access to the most preferred chosen goods of high-demand brands. This high-class experience is also important for brands sold on the site.



“In the case of Rue La La and Gilt, it’s more about having velvet ropes around the experience so vendors/manufacturers don’t feel like their product is on sale at TJ Maxx,” said Sucharita Mulpuru, VP & Principal Analyst, Forrester Research.

For every-day services and one-day-only auctions, the Groupon model offers a free location-based service. After entering a city and e-mail address, consumers have access to cheap deals for local businesses, which they can easily share with friends and family via e-mail and social networking options. The only catch to this service is that a certain number of people must first show interest in a deal before it becomes valid for purchase.


What Retailers Can Learn
Despite low prices being an important factor, the psychological idea of getting something in scarcity seems to be what drives conversions — the “thrill of the hunt,” so to speak.

“If you can message that there are a limited number of items, even when there’s not a daily deal, that can be compelling to driving sales,” Mulpuru said. “This shows the compelling difference between ‘daily deals’ retailers like Groupon and Gilt versus companies like Amazon, which just have 24-hour sales and a larger amount in stock.”

groupon_cap2With the holiday shopping season right around the corner, brick and mortar retailers can take a hint from their “daily deals” competitors for their web sites. Wine Library, a brick and mortar wine seller, has resorted to a daily deals format to jumpstart sales, with a supplemental web site, Cinderella Wine. The site offers high-class wines for low prices, and shoppers have to grab the chance at purchase in 24 hours.

While the daily deals model of Cinderella Wine offers daily auctions, it builds on Wine Library’s selective discounts. The site offers advanced notice for upcoming offers and the start time, which is typically noon. Wine Library’s approach creates a more hectic sense of urgency, placing a rare offer of an extreme discount, surrounded by standard prices. This shows the importance of catch the buyer’s eye right before purchase, which can be something other retailers can take a hint from in their stores — a concept Mulpuru suggests is merchandising a product before checkout, urging people to add an additional unit to their shopping cart.

The key concept to this model is scarcity. Both scarcity of time of a sale and scarcity of items compel buyers to convert. As the holiday shopping season approaches, consumer value is, once again, top of mind. By offering consumers special deals and timely offers, online retailers can enhance their value proposition to give consumers something to shop about — and ever so urgently.

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