In the wake of the economic downturn, consumers were forced to tighten spending belts as value crowned the “smart shopper’s” list of considerations before making a purchase. The “daily deal” and “private sale” models emerged in response. Market leaders Groupon and LivingSocial have dominated the “daily deal” category, while sites like Rue La La, ideeli and Gilt (among others) offer the exclusive VIP-approach to private sales.
The notion of getting the best deal, for many shoppers, is an accomplishment that is driving new consumer behavior. This new wave also has shifted the marketing and spend model for smaller retailers. Rather than investing in local media, including newspapers and television, retailers are buying into the “daily deal” model as a new way to reach local shoppers.
Sales at daily deal and flash sale sites grew 60% in 2009 and 70% in 2010, according to American Express Business Insights, which tracks the spending habits of its 90 million cardholders.
Female shoppers with children, which are regarded as the “decision makers”, have gravitated toward these special sale sites as a cost-saving strategy. According to TOTSY’s first annual Mom Shopping Trends Report, conducted in conjunction with BSM Media, 86% of “moms” have purchased items from online sale sites, and 32% said it was in their top three cost saving strategies, with clothing being the most sought-after category.
“Though shopping online can save people the hassle of visiting stores, they still need to comparison shop at several sites before they can be sure they are getting the best deal and make a final decision,” said Guillaume Gauthereau, CEO of TOTSY, a privately held company dedicated to providing its members with access to “coveted and essential” products and brands designed for expecting moms, parents, babies and kids at sample sale prices. “The private sale site model improves the online shopping experience by providing the best products at the best pricing, often at discounts higher than you’ll ever see at any retail site. We like to think of ourselves as a personal shopper for the savvy mom who not only brings her things she needs but also negotiates the best price.” Each TOTSY designer-specific shopping event is held during a 72-hour period.
ideeli, a members-only shopping site with more than three million members, offers its shopping community access to designer brands at up to 80% off, in addition to $25 shopping credits for each friend who buys. “At ideeli, we think of our business model as real-time retail, where we take real-time customer feedback and in-the-moment market trends to create a shopping experience that changes daily to be fresh and relevant to our members,” said Paul Hurley, Founder and CEO of ideeli. “Traditional online retailers are beginning to embrace this model and the idea of delivering an entertaining and engaging retail experience that is never static and always changing ― even daily ― whether by staging their own limited-time onsite ‘flash sale’ events or surprising customers with giveaways and other limited-time promotions on social media.”
Rue La La, an invitation-only online destination, offers members premiere-brand, private sale boutiques, each open for just a brief window of time. The growth of the community is dependent upon new invites. Referring users are rewarded with a $10 Rue La La credit when a new friend places his or her first order.
Some other more traditional retailers also have entered the daily deal arena:
- Target offers a special “daily deal” some days featuring multiple items. The time-limited deals are only available until stock has depleted, and the “daily deal” items always ship for free.
- L.L.Bean offers online shoppers the L.L.Bean 2-A-Day Markdown, during which the company presents a significantly marked down new item daily from 8 a.m. to 2 p.m., and another from 2 p.m. to midnight.
- Amazon.com “Gold Box Daily Deals” features a product for the entire day or until it’s sold out, along with “Lightning Deals” that change approximately every two hours.
Avoid One-Size-Fits-All Approach
While many eTailers have caught on to the potential of this shop-now model, industry insiders advise that a one-size-fits-all approach to providing special deals can, in many ways, be more detrimental than enticing for consumers. In the era of real-time retail, customer preference and relevant reigns supreme, and experts caution retailers to keep this top-of-mind.
“Whether in-store or online, it is essential for any business to cater to their consumers and not offer blanket-deals that only pertain to a portion of their consumers,” said TOTSY’s Gauthereau. “TOTSY serves as a personal shopper and as any qualified personal shopper, you have to be able to predict your client’s preferences.”
“[The Moms Trends Report] has provided us with a clear view of how different moms have differing styles of shopping and communicating,” said Maria Bailey, CEO of BSM Media. “Moms are amongst the most critical and lucrative audiences for the online retail market and these surveys demonstrate how a ‘one size fits all’ approach will never work for this diverse demographic.”
Gauthereau added that one of the bigger “lessons learned” is how to sell to customers, and ultimately, retain their attention. “Discounted prices on a sale rack or online sale tab is nothing new to shoppers. People may hit the sales occasionally but are not attracted to last season’s giveaways.”
According to ideeli’s Hurley, the site’s data-driven model enables the company to categorize its customer base into segments. “Depending on the segment you fall under, we can present you with different deals and opportunities that are most relevant to you based on past shopping purchasing behavior and other criteria,” he said.
Some believe the deal-of-the-day model may not survive the long term. “The deal of the day model is just one deal, ‘hope you like it’,” said Fiona Dias, Executive Vice President of Marketing and Strategy of GSI Commerce, parent company of Rue La La. “So I think that’s where retailers need to evolve. I’m not sure just having one item on sale is enough to engage people. At Ru La La there are 40 or 50 items offered — it’s not just one deal of the day.”