Ronnie05's Blog

The Economic Slowdown could be a boon for daily deal websites to make money and establish themselves

Posted in Collective Buying, Industry updates by Manas Ganguly on June 29, 2011

Boston Consulting Group recently released a report which says that Consumer Confidence Is Retreating in Many Parts of the Developed World. Nearly 90 Percent of Respondents in developed countries say they plan to maintain or reduce spending—but China and India Are Notable Exceptions. BCG’s 2011 global report on consumer sentiment, Navigating the New Consumer Realities states that the negative emotional responses (which are chiefly due to the economic slowdown) are directly affecting spending behavior.

To quote the report- Consumers are trading down and purchasing more private-label products because they feel it’s important to get a good deal—not necessarily because they can’t afford the price.Trading up has shifted from conspicuous to ‘conscientious’ consumption.

Now then, consumer buying preferences are shifting to bargains and thus, this should be music to the daily deal makers. If consumers start flocking the daily deal websites such as Groupon, Snapdeal, LivingSocial and so on, traffic to these sites is going to multiply. Is that good or is it bad?

On a immediate basis it is better than good, Great in-fact for the daily deal businesses. More traffic, more revenues, more businesses signing in and the general doubt on the nature and sustainability of this business model will be laid to rest. This will be brand antagonistic. However revenues, profits and footfalls aside, the daily deals businesses will need to perfect their back end business models and deals with sellers and businesses. Currently that side of the business is less than great! Inability to put traffic and back-end mechanisms in sync could end up in a lot of consumer and partner dissatisfaction. As is said, “there is no better time to build a quality business than a economic downturn”, the daily deal websites will have to master the art of riding this wave during the downturn.

In the long run, Brands will build back the “trading up” factor and their relevance. However, daily deals and bargains will hold a part of the flea bargain market for categories which are less personal and relevant to consumers.

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