March 9, 2011, 2:37 PM

Venture capitalists: Daily deals need to be personal

Speakers at the Innovate 2011 conference discuss the future of e-retail.

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Daily-deal offers need to become more targeted, retailers need to think beyond the Facebook Like button, and web merchants need to investigate the fledgling subscription model of e-commerce——that was some of the advice handed out today at the Innovate 2011 conference in San Francisco by venture capitalists talking about the future of online retailing.

Last year, much of the talk from venture capitalists focused on flash-sale retail sites, noted moderator Brett Hurt, CEO of Bazaarvoice, a ratings and review technology vendor. This year, the hot area is daily-deal providers, which include Groupon, LivingSocial and, according to some estimates, nearly 300 other competitors in the United States.

Aileen Lee, a partner at Kleiner Perkins Caufield & Byers, a prominent Silicon Valley venture capital firm, said she receives about 20 daily deal offers each day. She said there is a glut of daily offers, in part because physical couponing is moving to the digital world. One way for daily-deal companies to survive, she said, is to offer consumers deals and discounts that are more personalized and more relevant to their shopping interests, perhaps by finding ways to use more data from consumers’ purchase histories. She used this example to back her advice: She knows an African-American consumer who receives offers for self-tanning services, which shows the need to improve daily-deal personalization.

The daily-deal space may be hot, but why certain offers are a hit with consumers remains a mystery, says Peter Fenton, general partner with Benchmark Capital. “It’s still fraught with randomness,” he said.

Joshua Goldman, a general partner with Norwest Venture Partners, doubted that daily deals are a fad. “I think it’s a deal economy,” he said. He added that one reason Groupon has grown so quickly is because it curates deals, which appeals to consumers who are tired of combing through large amounts of data and choices, including search results.

In fact, one of the themes of the discussion was how retailers can benefit if they find ways to deliver more personalized or curated deals to consumers. One such example, according to Lee, is One Kings Lane, a flash-sale site that offers limited-time discounts for home furnishings. “I think curation is critical,” she said. “One Kings Lane is introducing consumers to brands they’ve not heard of before.”

Lee and her co-presenters also offered a reminder that has become a common bit of advice to retailers over the past year: Getting consumers to follow a brand or retailer on Facebook is nice, as is getting them to Like products, but even better is figuring out to build a maintain a conversation with consumers through social media. “I like Likes, but I am concerned about the focus on getting fans,” she says.

“The goal is creating a dialogue with consumers,” Lee added. Not doing so, she said, is like collecting consumers’ e-mail addresses but then failing to send them e-mail marketing messages.

The presenters offered few specific ideas about how to create such dialogue, but Frenton urged retailers to focus also on Twitter. Saying that a quarter of tweets, or Twitter messages, contain links, he likened the messaging service to a distribution network through which retailers can spread word of offers or product announcements, and direct traffic to e-commerce sites. He also said that, much like they did with Google in the previous decade, retailers need to invest and experiment with Facebook and Twitter to discover what works best on those channels.

Another hot area for e-commerce are online subscription services——HauteLook this week, for instance, launched SoleSociety, which offers personalized shoe recommendations and monthly shoe deliveries for $49.95 a month. Such a model differs little from the record clubs of the past, Goldman notes. “Everything old is new again,” he said. But that doesn’t diminish the model’s appeal, he added. “It’s a powerful trend that is worthwhile to watch.”

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