In the last year, daily deal companies have been on the rise, with the promise of giving shoppers an offer they can’t refuse. Rue La La and Gilt Groupe provide discounts on the most sought-after designer apparel, while Groupon and LivingSocial are key players in local deals for small businesses. With the help of iPhone and Android apps, access to these deals is easier than ever, prompting an influx of interest. However, Groupon further reignited the market after filing an IPO with the Securities and Exchange Commission on June 2.
The move to public was underwritten by Morgan Stanley, Credit Suisse and Goldman, and is worth $750 million. With more than 83 million subscribers and 28.1 million Groupons sold in Q1 2011 alone, outsiders can now own a piece of the daily deal model’s largest company. This, along with their plans to team up with discount travel site Expedia on a daily deal travel project, is reaffirming the anticipated growth of the market.
According to a March 2011 forecast conducted by BIA/Kelsey, consumer spending in the daily deal market is expected to reach $3.9 billion in the U.S. by 2015. Groupon is likely to be a primary recipient of this spending, with 24 million unique visitors as of April 2011 ― a 650% boost over last April ― according to analysis from Compete. LivingSocial is another leader, with a reported March to April 2011 and yearly visitor increase of 32.7% and 418%, respectively.
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As the daily deal companies are cultivating more loyal subscribers, they also are developing different types of arrangements with partner companies. The latest trend added to the daily deal model is instant deals, which allow users to find hyper-local deals based on their current location. These deals also have a stronger sense of urgency, lasting for merely a day ― sometimes even a few hours.
“The addition of instant deals considerably strengthens the coverage of the daily deals companies,” said Peter Krasilovsky, Vice President and Program Director, BIA/Kelsey. “Instead of having a relationship with just a few businesses a day, they can now work with dozens of merchants at a time. The instant deals are also more appealing to merchants in some ways. For instance, they can control when they want customers, and how many.”
LivingSocial And Groupon Go Hyper-Local
LivingSocial CEO Tim O’Shaughnessy said in an interview with Business Insider that his company’s strong relationships with partners is what will give LivingSocial an edge over Groupon. The competition between LivingSocial and Groupon is heating up, with LivingSocial launching Instant Deals for New Yorkers. LivingSocial expects to do well in New York following a successful launch of a $1 lunch deal at participating restaurants in Washington D.C.
This new app from LivingSocial’s service is competing directly with Groupon’s newest app, Groupon Now!, which is designed to deliver a similar service ― short-term deals to users when they’re in a specific area. The app is currently available on iPhone and Android.
“Instant deals are uniquely mobile-centric,” said Krasilovsky. “People can use them as they are walking out of their office to find a deal at a restaurant they may never have otherwise visited.”
With instant deals, retail partners can expect greater brand exposure and a larger base of loyal customers, industry experts noted. “It increases the likelihood that these companies become an integral part of their users’ ‘lifestyles,’ rather than just being used when users are fishing for something to do on the weekend,” said Krasilovsky.
Amazon, Facebook Dive Into Daily Deals
Further evidence that daily deals may not be a passing trend, Amazon is double-dipping into the arena. The company recently acquired woot.com and also launched MYHABIT, a luxury apparel and accessory daily deal site. Offering items for men, women and children, MYHABIT is promoting an average discount of 60% off goods from designers including Dolce & Gabbana, Modern Vintage, Culturata and Ed Hardy. MYHABIT sales begin at 12noon EDT every day and last for 72 hours.
Although Amazon has invested in LivingSocial, the company also is making a branded foray into the location-based daily deal market. The company is in the beginning stages of a new site called AmazonLocal, which will offer deals on meals, events, spa treatments and more, based on a user’s location. At presstime, Boise, Idaho was the only state currently available for AmazonLocal deal redemption.
With more than 600 million users worldwide, Facebook Deals has been cited as a threat to Groupon since its inception. Four months after the addition of UK, France, Germany, Spain and Italy to Facebook Deals coupon areas, the social networking powerhouse has taken on several additions in the U.S. Atlanta, Austin, San Diego and San Francisco are now available on Facebook Deals, giving users the chance to snag quality deals, simply by entering their credit card information.
