Merchants on the Fence About Daily Deals

Daily deal site discounts aren't a fit for every merchant, a new survey finds.

Image: iStockphoto

For merchants, the question of whether or not to do a daily deal is tough: Yes, it will bring in guaranteed customers, but is it worth it if you have to offer goods and services at a discount and only get to keep a portion of the proceeds?

Daily Deal Media ran the results today of a survey it conducted with merchants to see whether they find daily deals to be worth it. Reporter Stephanie Taylor queried more than 40 merchants who had run such deals this July with the idea that months later they would be better able to gauge the long-term impact.

The small pool of participants makes this survey more anecdotal than scientific, but it still provided some insights into the deals from the merchant's perspective. Here are a couple of conclusions that stood out.

Biggies take half the proceeds: It confirmed what we’ve heard before: The biggest daily deal companies still take an average of 50 percent of the deal revenues, but smaller companies are willing to take less. The downside is that those smaller companies have fewer consumers on their email lists, so merchants may end up with fewer deals and less revenues.

A trend or a keeper? Merchants can't decide: Merchants were split down the middle when asked whether the daily deals industry is here to stay, with perhaps 10 percent on the fence. Analysts at BIA/Kelsey are more confident, predicting in September that the daily deal business would rake in $2 billion in revenues this year and $4.2 billion by 2015.

Business models matter: As time goes by, and merchants get more hip to how deals work, they will increasingly turn to the companies that offer them the best service. One interesting point came from the company Cell Pig, which sells mobile accessories online and has run 20 or more deals with several different daily deal companies, enjoying “small booms” each time but also finding some minuses.

“If companies take a long time to pay out money from the deal, it hurts my ability to restock my supply,” Cell Pig’s Mike Cane told Daily Deal Media, adding that his favorite company to deal with all around was a smaller player, kgbdeals. That’s a relevant criticism for a company like Chicago-based Groupon, which, according to public filings, carries a debt to merchants on its books and hasn't received much love from store owners in other polls.

A spa owner said she found that Washington, D.C.-based LivingSocial makes it easier to keep track of who has used their voucher, but that Groupon was easier when it came to budging on terms of the deal. One man who ran a heating and cooling business said he didn’t pick up enough customers, while an Invisalign invisible braces provider was disappointed with her experience.

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