Until last year the headlines about Groupon, the original and biggest online daily deal business, were almost all about its explosive growth.
Founded only 5 years ago in 2008, Groupon reported revenue of a staggering $2.3 billion revenue in 2012. In the wake of Groupon’s spectacular growth has emerged a whole new category of e-commerce businesses. Groupon has spawned thousands of copycat flash sale sites the world over, each hoping to carve out their own niche in the wake of the Groupon juggernaut.
There are probably a hundred or more in New Zealand alone, including 1-Day, TreatMe, GrabOne, TheSale, Gumboot and all the rest. In America the big names in daily deals include LivingSocial, Gilt Groupe, One King’s Lane, Fab.com, and MyHabit; the list goes on and on.
The once red-hot online-couponing business faces significant challenges.”
But it’s no longer all good news in the world of flash sales and daily deals. Consider these recent headlines:Groupon leads the parade of e-commerce stock losers Groupon lays off 80 members of its sales team Groupon fails to turn a profit Fab.com changes directions Living Social Learns Speeding Doesn’t Pay LivingSocial lays off 400 employees
The Wall Street Journal wrote on the subject of LivingSocial laying off 10% of its workforce, “The once red-hot online-couponing business faces significant challenges,” and blames rapid expansion for the financial problems at both LivingSocial and Groupon.
Clearly all is not well in the flash sale and daily deal business. Groupon announced a loss of US$81 million for the last three months of 2012 despite earning $638 million revenue. One of the casualties has been Groupon’s founding CEO Andrew Mason, ousted amid the continuing financial losses.
Is the daily deal star starting to fade? Is the writing on the wall for the flash sale business?
My view is that, love them or hate them, daily deal and flash sale sites are here to stay.
If the Internet has an accelerated business cycle, the e-commerce sector’s business cycle is even more rapid, progressing from early adoption through growth to maturity and consolidation in years rather than decades.
Following that logic, the daily deal business has experienced its growth phase, is entering maturity, and we can expect consolidation. Some companies might fail spectacularly, most will merge or be acquired, many will quietly close their doors. But the business of running flash sales and daily deals is going to be with us for a long time yet.
The real question for those of us selling into the USA and other big markets is not so much whether flash sales will be around, but how best to put them to good use to promote products and build market share.