By Randy Smith, Mobile Wallet Media
Thursday, August 16th, 2012
Daily Deals in reality are more like steroids than a sustainable way for small retailers to gain sales. In fact the Daily Deal relationship is a dysfunctional one. Successful merchants spend 1-15% of revenues for advertising and marketing costs. This does not include This wide variance is a function of margins and volume. Grocery stores and auto dealerships spend about 1% of revenues of marketing, while restaurants and clothing stores might spend 3-10% and services based business' may spend 15%.
For deals to survive they must more closely align with reasonable fees and lessor discounts, but they must do much more than this, they must go through a metamorphous to fly another day. And on another day coming soon, I will provide the next chapter (Daily Deals Manifest Destiny is set for publishing on August 29th).
Daily Deals in their current form are too dysfunctional and destructive to be sustainable. In any functional relationship, their is always a Win-Win and not Win-Lose outcome. Yes deals have their place in the world, but they are more akin to Check-Cashing stores. Like steroids used in temperance they can work to heal. But if deals are depended on they will permanently destroy margins and condition customers to only return with a great deal. Merchants that focus on sound core retailing fundamentals will always win in the end. See my "SEVEN main reasons why 20% of customers make 80% of purchases" in week 3 of our 7-week series: "The 7 S's Required for Success in Mobile Payments."