Hysteria drives sales on one-day websites

BY ROB O'NEILL
Last updated 10:20 19/09/2010

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When American magazine Forbes last month named Groupon.com "the fastest- growing company ever" it drew attention to an online phenomenon, the one-day deals websites that are springing up in all sorts of variations, both globally and locally.

Kiwis like a bargain as much as anyone, but the ease with which such websites can be created has resulted in a glut of one-day deal offerings and to some predicting a shakeout as smaller players fall by the wayside.

Forbes noted that these sites inject hysteria into web bargain- hunting, often featuring a clock ticking down time until a bargain closes. They also do what many of the first generation of dot-com companies failed to do - make real money. When Groupon.com was only 17 months old, the company was valued at $1.9 billion, and it is likely to surpass $689 million in revenue this year.

No surprise then that local online entrepreneurs have been quick to bring the concept home and to build a number of variations, specialising in servicing particular areas, particular markets or experimenting with new models, such as "social buying".

Auckland-based Dinesh Kaku is behind Dealaday.co.nz, which he reckons was the second local one-day deals site behind 1-day.co.nz.

"A year ago there were three or four sites," he said. "Now a lot of people have jumped in."

So how do these sites differentiate themselves and draw attention amid all the online noise?

Dealaday.co.nz offers free products from time to time and that brings people back, Kaku said.

It also helps build an all-important customer database to be marketed to in future. Dealaday has a base of around 30,000 users on its database.

The site also offers "Dealaday dollars" back to customers as a kind of rewards system.

Change and experimentation are also required online. Kaku does not want to disclose his plan in detail, but, suffice to say, a new format can be expected at Dealaday.co.nz in the next few weeks, to keep ahead of the market.

Kaku said it could be tough going for new players to make an impact in what has become a crowded market. Some with major backing, such as Grabone.co.nz (APN), can probably find a place, but others without that kind of support could "fall apart", he said.

That said, there are still models to be explored. Kaku, for instance, is looking at social buying and bargaining, allowing groups wanting to buy the same thing to aggregate their demand online and bargain with suppliers for the best deals.

One newer entrant that appears to be making headway is Dailydo.co.nz.

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The co-founder of the six-month-old company, Dave Healy, freely admits to be inspired by US giant Groupon. Dailydo.co.nz is different from many other sites in the market in focusing on services - in areas such as health and beauty, eating out, fitness, mechanical and so forth. It is also highly local, with tabs on the site to take you to seven cities with unique offers for that region.

But Healy is not a fan of the "trigger point" used by sites such as Groupon. These triggers require a certain number of buyers before anyone can get access to the deal on offer.

Healy thinks this is "gimmicky", as the trigger point is always low and always passed very quickly.

Dailydo.co.nz works on a simple commission structure. Users print out vouchers that they take to the retailer or service provider and Dailydo gets a commission on those sales.

Healy said there's no up-front cost to the advertiser and commissions are "flexible". Currently the Auckland site offers a full quota of seven deals a week, while the others are building towards that, he said.

Anyone offering services can get on the site, but Healy said it is important that the customer has a good experience.

The crew at Dailydo.co.nz have tried a number of things to build momentum, including using social networking, radio and print advertising. But the most effective strategy is to provide value, Healy said.

"We've learnt that the most important thing is to have really good deals," he said. "People will tell other people and do our social networking for us.

"Word-of-mouth is critical for us," he said.

Despite being the new kids on the block, Healy said the business went cash- flow positive in just two-and-a-half months. That said, now money is being put back into the business, to build its database.

There are a number of advantages for businesses trading through such deal sites.

Chris Drummond, of Motueka-based Anchorage Wines, has listed some of its products on 1-day.co.nz's offshoot 1-daycellar.co.nz. He said it's a good way to clear end-of-line products and to sell direct with prompt payment assured, at a time when the wine industry is struggling with glut and a high exchange rate impacting on exports.

It is also good marketing, building brand awareness and getting people to drink your product - and maybe come back for more.

Hamilton-based 1-day.co.nz and its offshoot sites is, at just three years old, the grand-daddy of New Zealand's one- day deal websites. Founder Luke Howard- Willis also expects a shakeout as some of the smaller and newer sites find the going tough. The major players will get bigger, he predicts, as customers have only so much time to spend with any given website.

Outwardly, the model looks easy and people have jumped into the game, but to get the volumes right is difficult. A few sites have already disappeared, he said.

Howard-Willis said Trade Me had created an environment where New Zealanders are now a lot more comfortable transacting online. That has helped create an environment for online models to be explored. Like DailyDo, 1-dayco.nz is now targeting services, for instance, an area where he expects group buying for discounts to be an effective offering.

- Sunday Star Times

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