Finding a niche with one-day online offers

STARTUP

In a world seemingly over-run by one-day deal sites, how do you stand out? That's the challenge facing 28-year-old entrepreneur Daniel Taiaroa. His Deal Eater website offers one-day deals on food and entertainment.

Cafes, restaurants, bars and cinemas all offer one-day deals through Deal Eater.

If enough people sign up in a day, they get the deal.

If the discounted deal doesn't achieve critical mass in the required time, the retailer has been exposed to the site's audience for free.

The challenge is competing against much bigger deal-a-day websites which can offer greater discounts, says Patrick Rottiers, a technology veteran who runs a consultancy in Christchurch and lectures at management schools around the world.

And Taiaroa has to weigh up the cost of sourcing enough deals to attract a worthwhile market.

"That acquisition cost is a key. How much does it cost to go out and contact companies to continually get new deals on board, and do you have a scalable model?"

Clearly, if you restrict your market to one city, you don't have a scalable model. Taiaroa's website operates in Wellington but he has plans to expand into Christchurch and eventually Auckland.

One thing in Taiaroa's favour is that he is smart and keen, says Rottiers.

"And he is happy to keep testing and tweaking his site."

But because Taiaroa's site doesn't have the audience numbers or purchasing power of a larger site he has to convince his audience that his is a sexier site, worth supporting.

That is sometimes where a local site helps, says Rottiers.

You can convince users they are part of a unique community and they will feel it is worthwhile supporting a local site which offers deals from local businesses rather than generic bargains.

Rottiers reckons it is also part of the Kiwi psyche to support local sites.

Look at the success of Trade Me here while eBay has been much more successful offshore.

And people often purchase for complex reasons including price point. Are deal-a-day sites purely dependent on bargain discounts as their name suggests or can there be a strong social and emotional flavour to the purchasing?

"Will the social phenomenon become more dominant than the economic one or are people simply looking for recession-driven price discounting? The other challenge I discussed with Daniel is whether to go wide or deep. It could be interesting for suppliers to use the site for research. "Will price points drive purchasing behaviour? What sort of volume can be generated? A website allows immediate measurement of the sample market."

And Taiaroa doesn't have the financial clout to compete with larger sites across a wide sector. His niche is in local deals but will he get enough volume to attract quality deals and will his suppliers get enough quality market research to continue offering those deals?

Watch this space, says Rottiers. It's a fast-moving sector still in its infancy here.

Mark Revington is the editor of Unlimited magazine.

- © Fairfax NZ News