Groupon claims daily deals are "virtually risk-free for merchants"

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Posted 19 March 2012 11:08am by David Moth with 0 comments

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Groupon UK MD Roy Blanga this morning defended his company's business model, stating that the deals were "virtually risk-free for merchants".

He said that daily deals sites provide a new source of inspiration for customers and help drive incremental sales.

During a speech at the Daily Deals Summit Europe, Blanga also claimed that it is a misconception that deal subscribers were all driven by discounts.

Maybe at the beginning early adopters were price sensitive, but no there are so many millions of people using these platforms that they can't all be discount hunters."

Similarly, he suggested that as daily deals are 'unannounced', Groupon helps drive new customer acquisition but does not damage brand perception.

Since becoming a global industry in 2010, Blanga said that daily deals sites have evolved from simply offering discounts to offering experiences.

This is highlighted by the fact that deals have moved away from local offers to include product and travel deals.

Instead of just having a discounted one hour massage, we now offer a full experience such as a Thai massage with afternoon tea."

He said that by shifting the focus to experiences rather than discounts, his company and others were offering local businesses a risk-free, flexible and trackable customer acquisition strategy – something that previously was considered to be complex and costly with limited ROI.

It is virtually risk-free as merchants only pay for the customers who come through their door, and they are highly trackable as you can easily measure the number of customers."

But while he defended the daily deal business model, Blanga also accepted that the industry must still overcome misconceptions and improve its service levels for both merchants and customers.

He said deals need to become more targeted and appropriate according to past purchases and location.

Sites must also find new ways to interact using mobile, and instant deals that are relevant to the user's immediate situation and the retailers in their proximity.

As long as we continue to evolve and anticipate our customers' need to be inspired and the need of the merchants to acquire new customers and maximise returns the industry can continue to grow."

David Moth is a Reporter at Econsultancy. You can follow him on Twitter.