Should you be one of the few individuals left who hasn’t heard of a daily deal site like Groupon or LivingSocial, you won’t be able to say so anymore. These websites are relatively new, having sprung up only in the last two or three years. Though Groupon and LivingSocial are the two largest sites, there are hundreds of others, some of which specialize in children’s offerings or luxury goods. Dedicated customers are loyal to the fantastic bargains they offer, but many of us don’t realize how these sites actually work. What’s in it for the companies? How do Groupon, LivingSocial, and other sites make money?
How a site like One Kings Lane operates is rather simplistic. The site approaches businesses, designers, retailers, and restaurants. They negotiate truly large discounts, often for over fifty percent of retail price. They have a client email list who they offer these deals too. It works whether it is a national deal or a local one. Bargains are time-sensitive, so customers may only have a day or two to purchase. Businesses love it because it offers them new customers who may either buy more products than the deal is for once they’re in the brick and mortar establishment or become repeat customers (and this time at full price). Plus, the marketing give tremendous name recognition, even to those who don’t purchase the bargain.
Still, How Do They Get Such Great Discounts?
There are several factors at play. First of all, the larger the site’s client list is (the people they email concerning these deals), the better discount they’ll procure. That is simple economics. A larger supply of potential customers is attractive to merchants, and they are more than willing to provide those steep discounts. Also, a benefit the deal sites provide to the merchants is the ability to specify a minimum number of orders needed for the deal to go through. For some retailers, it may only be three, but others prefer larger numbers like twenty or twenty-five. To sum it up, the greater number of potential customers a retailer thinks it can acquire, the larger the discount. That’s why Groupon often has the best deals. It has a list of hundreds of thousands of clients, so merchants are often excited to use them.
There is another type of daily deal site. Jasmere is a good example of this type. They work like this. A deal is offered for an initial discount, which is usually fairly decent. For example, you could purchase a voucher for $35 worth of organic cotton clothing for only $18. However, for every twenty deals purchased, the site will drop the cost of the voucher by $1. So, if sixty deals are bought, the voucher will cost everyone only $15, not $18. That works for everyone, including the people who purchased when the cost was at its highest. Simply put, no matter the type of daily deal site, they get great discounts because they reach farther than a restaurant or merchant could on its own.