Daily deal sites from Groupon to LivingSocial to Gilt are part of a major etailing trend. Consumers make their way to flash sales sites with hopes of finding major markdowns on items they either need, or pull the trigger because they’re getting a bargain.
But does partnering with these daily deal sites make sense for merchants? According to a recent survey by ForeSee Results, it does, but it doesn’t help with customer loyalty.
Of the people buying daily deals, ForeSee Results says 38% of customers surveyed were already frequent customers of the merchant whose deal they purchased.
“In other words, existing customers, loyal customers, are getting significant discounts to buy what they might have bought anyway,” ForeSee Results CEO Larry Freed wrote in the report. “The added value is minimal, it erodes margins and potentially conditions the loyal customers to become discount seekers.”
But based on the survey results, it can be argued that anywhere from 35% to 62% of flash sales buyers represent new business for its partners: The report says 31% of buyers are new customers who weren’t aware of the company before the deal plus those with some brand awareness, 27% were infrequent customers and 4% were former customers.
That means third-party selling through daily deal sites is not just a way to unload excess inventory.
Rachel Francis-Feller, business development account manager for Optimo Sunglasses, says these partnerships have helped the year-old merchant both gain brand exposure and new names for its database.
“The increase in traffic has been significant,” Francis-Feller says. “With DealPulp, our web traffic increased 4,000% on that day. So whether the prospect buys or not, they see our store, and that is important.”
In addition to working with DealPulp, Optimo Sunglasses has offered coupon codes with daily deal sites such as Rootz.com, CityDeals, Woot and HealthFields. Francis-Feller says Optimo Sunglasses will continue to sell via flash sales, but cut back on which ones it partners with.
“We’ve been throw it to the wall and seeing what sticks,” Francis-Feller says. “It’s been trial and error.”