Why Daily Deal Sites Are Giving Up on Daily Deals

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Fewer and fewer consumers bother to open the daily deal messages plopped in their e-mail in-boxes, and fewer still follow through and actually bite on the offers. That’s why daily deal giants Groupon and LivingSocial are trying desperately to focus on other modes of netting sales.

Last week, after posting wider-than-expected losses and subpar sales in the third quarter, Groupon, the world’s leader in the daily deal space, announced that it would strive hard to push beyond the deal model it helped create—one that relies on subscribers opening daily deal offers sent to e-mail in-boxes and snatching them up promptly. One of the reasons cited for Groupon’s struggles is the change that came to Gmail this summer, which has meant that marketing offers (including those of Groupon) are segregated in a special “Promotions” folder rather than the user’s main in-box. As a result, Gmail accountholders have been less likely to open, let alone book, those daily offers from Groupon.

In a conference call with analysts, Groupon CEO Eric Lefkosky said that in the last quarter the company saw “low double-digit declines” in the percentage of subscribers opening its daily deal e-mails, according to Businessweek. Lefkosky explained that one of Groupon’s main goals was to expand far beyond the e-mail-marketed daily-deal business. Per the Wall Street Journal, he said, “We have to even further reduce our reliance on email and whatever happens with Gmail becomes less relevant.”

(MORE: Is the Daily Deal Model Dying a Slow Death?)

Lefkosky also tried to make the case that its e-mail-generated coupon bookings themselves are increasingly less relevant. When Groupon was a hip upstart, all of its revenues came via subscribers who purchased the daily deal coupons to restaurants, spas, and whatnot that wound up in their e-mail in-boxes. Lately, however, Lefkosky has more or less been bragging that sales originating from e-mails constitute “under 40 percent” of Groupon transactions.

Well before Gmail installed its Promotions folder, many have observed that the daily deal model appears to be dying a slow death, as interest in the no-longer-novel daily deals has waned among consumers and small businesses alike. What’s more, specializing mainly in daily deals seems to guarantee only more losses. “Groupon’s daily-deals growth is largely played out in its most-established markets in the U.S. and Europe, and whatever growth it manages to acquire overseas will most likely widen, not narrow, its persistent losses,” MarketWatch explained.

So it’s understandable, though ironic, that the company that brought daily deals to the mainstream is basically disavowing daily deals as a path to profitability. Among other efforts to get away from the narrow focus of daily deals, Groupon plans on broadening sales strategies to include deals that are available for anyone on its website—no subscription or e-mails necessary—and that can be purchased for more than one day.

Groupon isn’t the only daily deal pioneer that’s now emphasizing sales beyond the usual daily deals. Back in mid-September, the Washington Post noted that LivingSocial, the only large competitor to Groupon in the daily deal space, “wants to take the daily out of its deals.” Instead of relying on the temptation of random daily deals arriving in the e-mail in-boxes of subscribers, the company is trying to shift the focus to a website and mobile app where shoppers can browse for deals from local merchants that suit their interests.

(MORE: Groupone Fires CEO Andrew Mason: The Rise and Fall of Tech’s Enfant Terrible)

What will a daily deal business look like with “daily” increasingly taken out of the equation? Well, one would imagine it would look like a deal site—one of many. And it’s unclear why the deals from LivingSocial or Groupon would be more relevant to consumers than any other of the countless deal sites out there.

2 comments
cdixon21
cdixon21

One reason: email overload. I can't get through my work email, much less 50 emails a day on promotions. And I've had bad experiences on the buyers' end of Groupon with expiration dates not being honored, rude treatment by overwhelmed merchants, etc.

LindyVinings
LindyVinings

Groupon was great when there were restaurants participating and the deals were good.  The restaurants said they got slammed and quit doing the deals.  I do not want all the spa, dermabrasion, etc. groupons out there because I already have my sources for these things and mostly they are better than the groupons.  The real problem here is that people want restaurant deals and the groupon business model does not work for the restaurants.  So, restaurants are just sending out their own coupons or loyalty points and groupon is dying.  Sad but true.  Lindy