Daily deals market cannot stay as it is
Nectar’s exit from daily deals is just the latest example of how challenging the daily deals market has become in the UK.
The reason for pulling out just nine months after the site launched is that Group Commerce, the white label platform which provided Nectar deals, is pulling out of its deal sourcing operations in the UK to focus on its core technology business.
While the brand says it is reviewing the future of its daily deals platform and hoping to relaunch with a new supplier, it could be that this is an opportunity to back out of what is becoming an increasingly difficult market to operate in.
The list of players in the space is almost endless. Beyond the major players like Groupon and Living Social is a host of smaller players all jostling for share.
It seems as though businesses that have launched daily deals as sideline projects are struggling to make it work. GumTree pulled its platform and Trinity Mirror closed Happli within months of launching.
Unless it’s your core business - and even then - it’s a difficult to see a return as demonstrated by Groupon’s plunging shares last week following yet more dismal figures that resulted in CEO and founder Andrew Mason being fired.
Daily deals was a bandwagon that everyone seemed to want to jump on. However, most new entrants to the space probably underestimated how competitive and just how labour intensive it is to make headway. Consumers are feeling deals fatigue. A growing number of providers all seeking to offer better and better deals for customers means price and quality are driven down. Instead of once in a lifetime experiences at a once in a lifetime price, consumers are swamped with barely distinguishable deals.
On Groupon today you can get a 150-hour online TEFL course for £49 - an 85 per cent discount. On LivingSocial, a 140-hour online TEFL course will also cost you £49.
Where two years ago the deals you found on these sites would be distinct and unusual and offer something consumers wouldn’t want to miss put on. Now, it doesn’t really matter if a deal expires before a shopper gets the chance to purchase it because they can be certain a similar deal will come along either on the same site, or a rival sooner rather than later.
Rather than being a high interest channel offering access to something innovative, daily deals have become just another shopping channel. They are part of consumers’ repertoire alongside supermarkets, department stores and ecommerce.
Many small businesses are sceptical of daily deals or saturated with offers from competing platforms trying to sign them up. It also becomes increasingly difficult for the vendors to make a profit, so some are less likely to want to participate meaning the sales teams sourcing deals for sites such as Groupon and Living Social struggle to find businesses with high calibre enough products and services to offer as promotions.
One thing is certain that the market cannot stay the way it is with countless deals sites churning out samey promotions at samey prices, not standing for anything in particular or offering customers a reason to chose them over a rival.
Deals providers should be looking to improve their appeal with vendors by offering added value services that go above and beyond running a deal and help those small organisations build their business trough loyalty services that boost retention rates not just churning one-time customers though the cash register.
Becoming more niche and focussing on one are like travel, health and beauty, tech, or restaurants. would give a real authority on that market rather than being a jumble sale of random deals.
If Nectar does opt to get back in the business with a new supplier it will have to make more of its differentiation. Nectar’s loyalty business means it already has a huge database of customers and knows a huge amount about their shopping habits - something its rivals Groupon and Living Social do not have.