Photo: Budapest, Hungary - July 28, 2011: Selection of major Deal-of-the-day companies web sites. Including :Coupons.com, CouponMom!, Coupon Cabin, Livingsocial and Groupon / r.nagy / Shutterstock.com
The mainstream daily deals business is at a precarious stage. After Groupon’s initial immense success, many claim the daily deal business has lost its lustre. Yet, is there potential for a halal daily deals business? What learnings can be taken from the challenges facing mainstream daily deal businesses? What can be done differently to ensure success?
|YOUR PAIN POINTS ADDRESSED
You are the owner of a digital business and are considering entering the halal daily deals market.
How attractive is the halal daily deals market?
|What is the size and growth dynamics of the daily deals market?
|Which are some of the mainstream and halal players?
|What are the challenges and considerations in this market?
DAILY DEALS SITES
The revenue from daily deal businesses reached an estimated $4 billion in the U.S. alone for 2016, with 329 businesses and over 20,700 employees. The sector grew 15.9 percent from 2011 to 2016. With the U.S. projected to account for approximately 22 percent of the global e-commerce industry in 2016, this would imply a global market estimate for daily deal site revenues of $18 billion in the same year, excluding Canada (pdf) from North America.
However, the daily deals business has been called a “faddish e-commerce trend” and a “business fad on its way out”, as big players such as Groupon report falling revenues, the market moves towards saturation, and negative merchant experiences persist.
It seems that pivoting will be the saving grace for daily deals websites. Groupon has starting converting itself into an online marketplace, and LivingSocial (which Groupon announced it was buying last month) has turned to a strategy involving credit card discounts at restaurants.
MAINSTREAM DAILY DEALS SITES
Launched in 2008, Groupon is the leading daily deals company in North America. Many copycats emerged after its initial success, including LivingSocial, Woot, Retailmenot, Travelzoo, and Slickdeals. Groupon was valued at $16.7 billion when it went public in 2011 but is now valued at $3 billion. The company reported $3.1 billion in revenue in 2015. It announced last month that it will buy its rival LivingSocial, adding 1.2 million active customers to its 29.1 customers according to the company’s third quarter results.
LivingSocial was Groupon’s main rival, but will now be acquired by Groupon for a “non-material” amount. LivingSocial provides deals on dining, travel, and products. The company was valued at $6 billion in 2011.
Amazon entered the daily deals space in 2011 with AmazonLocal, offering local daily deals on restaurants, entertainment, travel and products, but closed towards the end of 2015 to focus on its core successful business model as an online marketplace and on its Amazon Prime express shipping membership program.
HALAL DAILY DEALS SITES
Many halal restaurants advertise on mainstream daily deal sites, and key players such as Zabiha Halal provide a platform to publicize special deals.
Over the past few years, a number of dedicated halal daily deal sites have emerged. Some of these have since closed down, while others are just starting. Here are some examples:
Launched in 2012, HalalDeals.sg is a daily deals platform based in Singapore that offers food, spa, and fashion deals. Eateries featured are halal-certified and products and activities are Muslim-friendly and family-friendly. HalalDeals.sg is owned by Singapore-based BizMedia Publishing.
Halal Daily is a daily deals website that was founded in 2012 but closed down a year later because of lack of traction.
Its founder, Omar Sharif, told Salaam Gateway he decided to enter the daily deals business because of the extraordinary growth of companies such as Groupon and LivingSocial. “I wanted to use the proven concept of online crowdsourcing to deliver large amounts of clients to halal businesses. Most halal businesses begin promoting to the local community through handing out flyers, word of mouth, or by being listed on Zabihah.com. I saw a great opportunity to crowdsource the entire local community through HalalDaily.” However, at the time most local businesses he approached were not interested in any type of online marketing.
HalalDeals UK is a marketplace for discounted halal products. The company’s business model is based on allowing merchants to list their products for free in return for a small percentage of sales made on the website. Categories include food, cosmetics, and clothing.
KEY CONSIDERATIONS FOR SUCCESS
To succeed in this sector, there are several considerations for potential and current market participants.
Competition is intense so differentiation is key
With the increasing number of daily deal websites, merchants have many companies to choose from in terms of where they will provide offers, and halal businesses are not only limited to promoting their offers on halal daily deals sites. It is therefore important for halal daily deal providers to differentiate themselves from others and to provide value to businesses. For example, Groupon recently launched reservation-based restaurant deals to help restaurants fill tables during off-peak hours.
Justify the cost to merchants that will likely undertake a loss
Businesses advertising on daily deals websites are often required to offer steep discounts that exceed those they provide elsewhere. In addition, daily deals sites share the revenue of sold deals with merchants. The revenue split ranges from 25 percent to 70 percent in favor of the daily deals site. Because of these two features, merchants often lose money on the transactions.
It is therefore important for daily deal websites to frame their offering as an advertising opportunity where merchants get exposure to a large number of local customers they would not otherwise have reached. It is also important to offer a fair split.
Appeal to the bargain hunters
Customers of daily deals websites are often looking for great deals and do not always convert to repeat customers. In order to provide value for businesses and ensure they continue promoting the offers on your daily deals website, work with businesses to provide loyalty-related offers to customers who have made a purchase.
Provide a wide array of offerings
Consider offering a wider range of services and not just daily deals offers in order to widen your offering and offset competition. “I think the primary advantage of a crowdsourcing site like HalalDaily would be the email list. The profit is in the email list. And having a website that caters to the halal market, not only in daily deals, but products, services, events, etc. is an untapped opportunity,” said HalalDaily’s Omar Sharif.
Ensure you develop a robust customer database
The core value that daily deal providers offer is their customer database. Groupon has 30.3 million active customers, based on the company’s third quarter results. It is therefore important to build a solid database, not just in terms of numbers, but also in terms of quality; the database should comprise of local, targeted customers.
|Differentiate yourself from competition: Rather competing head-on with other daily deals sites, differentiate by offering unique services to merchants and customers.
|Provide value to merchants: Tailor services to benefit merchant, for example by helping service-related businesses attract clients during off-peak hours. Also, offer post-sale loyalty promotions to encourage repeat customers.
|Offer a wide range of services and not just daily deals: In addition to offering daily deals, consider tapping into your wide database to provide other offerings.
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