This post has been part of my draft for almost 8 months now. For obvious reasons, I’ve not posted it. But now since I’m out of DealsAndYou.com, I thought of posting my point of view without any guilt trip.
So to start off, the daily deals industry actually started around end of 2009, and a friend and I gave it an early shot, with all guns blazing. However, the industry quickly shaped up like typical FMCG industries where money is the biggest ammunition to stay afloat, while revenue is out of volume sales.
Now, that’s not what a typical fledging startup thinks early on or rather wants also, but that’s the nature of quickgrowing business models.We got acquired & our fledgling startup got rebranded as DealsAndYou. That’s that.
The sales pitch to the local businesses was simple – helping them in offsetting the un-utilized inventory over a period of time by giving deep discounts to walk-in customers. That worked – definitely it did. That’s why we saw many daily deal companies raising multi-dollar funding to the tune of around $50 Mn in India aggregately in the last 2 years alone for geographic expansion, increasing sales footprint, operations cost etc, with definite revenue base (I’m not getting into the debate of Gross Merchandise Value vs revenue vs margins vs net profit etc).
But the question is, what problem did daily deal companies solve? After spending almost 2 years in the industry, I would say that they swayed away from the problem statement, wherein they were supposed to help local businesses in offsetting under-utilized inventory problem.
This problem came up another set of problems. Since daily deal companies were more like a destination portal for consumers to pick and choose which deal to buy; so customers often bought those deals which had less riders, were more easy on their wallet (i.e. more discounts), and could be redeemed almost anytime based on their convenience etc. Now if we focus on solving the customers purchase decision, then the local businesses issue takes a back seat, which is why there have been rants globally that daily deal companies don’t have long term sustenance, or that local businesses would slowly move away from them, since its a deal-breaker over a longer period of time.
Now, lets understand what exactly local businesses really want which in my opinion daily deal companies can’t really solve with the present set of business metrics which is more biased towards consumer convenience (don’t get me wrong here – serving consumers & providing convenience isn’t wrong. Its just the way business models work in daily deals businesses).
So for local businesses, daily deal models are slowly shifting from “need to have (N2H)” to “good to have (G2H)“.
So to put it in black & white, local businesses actually want this:
- Attract customers at lesser discounts (of course much less than what daily deal companies give, of over 50%)
- Customers walk-ins almost 24X7 and not necessarily during those hours when customers want to come, which is the late evenings & weekends because businesses are almost running full during those times.
- Lesser logistical nightmare like contracts, signups, deal structuring etc i.e. something more flexible which takes care of unorganized nature of the local businesses.
- Creating a pool of loyal customers & not being type-cast as discounted place.
- Something which helps the local business shift demand to those times when they are actually dull or running slow. That way, businesses can actually offset their un-utilized inventory problem.
Now such flexible, easy & intelligent way of helping local businesses is difficult for daily deal businesses to solve because of the business model paradigm (mentioned above) – but it is definitely is a huge opportunity at a global scale since the problem of unused inventory or lean hours problem is faced by almost all business.
Sampad Swain is a serial entrepreneur, and is currently working on a stealth startup. He had co-founded DealsAndYou, prior to which he founded Wanamo which was acquired. More here – on Twitter and on LinkedIn.
Crossposted from SampadSwain.com with permission.