Dear Dealy Customers:
We would like to thank you for signing and using Dealy over the last year.
Many of you have shared with us how Dealy has helped grow your sales. We set out to build Dealy for e-commerce stores to run their own deals.
After a lot thought, we have decided to shut down the Dealy application beginning March 31, 2012 at 10AM.
While the product has been successful we have decided to focus our attention to our other app Dealer Ignition. We are determined that we could not continue to further the product without impacting our other business.
Your accounts and the Dealy App will not delver any more deals after March 31, 2012. We appreciate your support and wish you success.
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Recently, customers have flocked in droves to websites offering daily deals. The business model for these sites varies by company, but the common theme is a great deal that’s offered for one-day-only. This model has proven extremely popular, drawing millions and millions of active users seemingly out of thin air, and becoming one of the most compelling success stories in the business world today. Companies like Woot and Groupon have shown that the idea of simple online coupons with a purchase window of a single day are incredibly attractive to consumers, and can generate a massive amount of business for the seller offering the deal. It’s not often that a promotional deal is so attractive to buyers as well as sellers. Often, it’s a give-and-take scenario with some mutual exclusivity. A promotion that the seller may love isn’t as attractive to buyers, and vice versa. So why exactly are daily online deals so popular for both buyers and sellers?
It’s easy to see why daily online deals are so popular with consumers. It offers an incredible value in the form of exclusive savings on local and national products and services at no cost to them. In the past, hugely successful companies have been built on the idea of selling customers the access to money-saving promotions. These have been in the form of books that contain coupons and vouchers, or memberships to discount warehouses like Costco or Sam’s Club. These businesses have been successful because smart consumers are able to recognize that the small cost of joining one of these programs is quickly offset by the savings they can realize on items they were going to purchase anyway. What daily deal websites like Groupon have done is to offer the same kinds of great savings, but at no cost to the consumer. By eliminating the consumer’s cost, they’ve made it a no-brainer and enjoyed incredible popularity.
What about revenue?
Of course, they’ve eliminated the cost of these bargains by offloading it to the seller. So why then, do the sellers love the model of daily online deals so much? It’s been reported that after the cost of the discount, and splitting revenues with Groupon, sellers have only broken even on many of their Groupon sales promotions. If these promotions aren’t always bringing in massive profits for the sellers, why are they so rabidly attracted to the model? It’s simple; the sellers are drawing in an entire customer base that would have overlooked them otherwise. It’s a longer-term strategy than simply selling more of their product on a given day, and it’s incredibly effective. A good example is a local day spa that is offering a full day of spa treatments on Groupon for $100. Let’s say that the spa usually sells this package for $200 (a similar price to their competitors), it costs them around $45 or so to deliver the experience to the customer. They’re going to have to split their revenues with Groupon for running the sale, so after deducting $50 from every $100 package, the spa is only profiting about $5 on every sale. Odds are, they’re going to sell a lot of packages, since they’re selling them for half of the going market rate. The incredible benefit to the company is not the actual sales, but the fact that the vast majority of people who buy the package would otherwise have not considered purchasing a day at the spa. When faced with such a great deal, however, they can’t resist giving it a try. If the spa gives them a great experience, they’re going to return, and the spa will see increased business in the long term. While this is a specific example, and the daily deals model can and often does generate great profits for sellers, it goes to show that the deal itself can be an incredible form of marketing.