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Daily Deals May Not Be So Profitable for Merchants
Just over half of businesses that run daily deal promotions report making a profit, with less than 50 percent willing to try again.
Posted 6/ 22 11 at 1:30 PM | News, Money, Advertising & Marketing
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Do daily deal coupons sometimes seem too good to be true? For the businesses offering them, they often are.In a survey by The Social Science Research Network of over 320 businesses that have participated in a daily deal promotion in the last year and a half, fewer than half of the businesses said they would run another deal in the future, with only 55 percent reporting that they made money.
The survey, covering deal sites Groupon, LivingSocial, OpenTable, Travelzoo and BuyWithMe Promotions, noted that nearly 73 percent of businesses expressed no loyalty to the sites and would consider trying another deal site for future promotions.
More than a quarter of the businesses involved lost money, and 18 percent just broke even. With only 20 percent of customers returning for future purchases, a lot of owners are contemplating the real worth behind the deal.
Even though nearly 80 percent of purchases come from new customers, 60 percent of customers only spent the amount that the deal was worth, creating no extra revenue for businesses. With most deal sites taking a cut of the sales profits (averaging 30 to 50 percent), businesses heavily rely on customers either spending more money or returning in the future.
Among the largest group to run daily deals, bars and restaurants and salons and spas fared the worst, with only 43 percent and 53 percent earning a profit off the deal, respectively.
Another hard-hitting figure? Merchants spent an average of 23 percent (or $46,530) of their annual marketing budget on daily deals, an expense difficult to justify for only a marginally profitable deal promotion.
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Comments (Page 1 of 1)
Most of the coupons don't even work unless you use good websites some of them Printapon retail me not etc, so do some research before you buy anything!
Well geez, what did they expect? Groupon et al is just taking another slice of the merchants pie......30% to 50% for a fricken email? For God's sake.
I wrote to Glenn Beck when he announced that he was going into to coupon business and said that I'd give that business model less than a year.
Now, they opened up a new way to prey on merchants...it's a "gang up on them model, where they have an Android app that compiles a "name your own price" idea, collect all the customers who want a deal on something they all agree on, and then pressure the merchants to go along with it.....it's disgusting. It's predatory at least, if not extortion, because the poor merchant knows that if he doesn't do it, his business will be lost to the merchant down the street that will.