April 1, 2011, 3:22 PM

To coupon or not to coupon is only the first question for e-retailers

Web merchants must consider branding and customer type when offering group-buying discounts.

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One of the most vital consideration for retailers that want to build sales via online coupons and group-buying discounts is also one of the most basic, say e-retailers: Figure out what kind of customers you are going after with such deals. “Every online retailer needs to think about what kind of people you are bringing to the site,” says Jamie Grove, who oversees marketing for ThinkGeek.com, an online gadget retailer that is No. 232 in the Internet Retailer Top 500 Guide.

ThinkGeek so far has concentrated its online couponing efforts on working with companies like CouponCabin Inc., which offer discounts similar to the traditional coupons that consumers clip from newspapers, and not sites such as Groupon and LivingSocial, which concentrate more on limited-time, group-buying offers and local merchants.

One reason is that CouponCabin tends to cost ThinkGeek less than offering a deal through Groupon, which typically takes half of what a consumer spends on the deal. Another reason, Grove says, is that ThinkGeek tends to appeal to what he calls web-savvy shoppers who already know about the company and its offerings, reducing the need to promote the brand through Groupon offers. “If it’s a brand without recognition, then the Groupon thing can be a really big deal,” he says.

That’s not to say ThinkGeek has ruled out going after consumers through Groupon or LivingSocial. Those daily-deal companies, after all, have formidable reach and profiles. Groupon, for instance, attracted 10 million unique visitors to its web site in November, up 54% from October, according to web measurement firm comScore Inc. CouponCabin, by contrast, attracted 8.8 million visitors that month, though its growth rate was 400% compared with October.

Both Groupon and LivingSocial also have raised a lot of money recently. Groupon late last year raised at least $950 million in capital after reportedly turning down a $6 billion buyout offer from Google. LivingSocial last year received a $175 million investment from Amazon.com, No. 1 in the Internet Retailer Top 500 Guide, and plans to expand to 300 markets this year, up from about 200 now.

But ThinkGeek has another concern that may limit its online couponing activities: “We are not really a discounting brand,” Grove says.

Other retailers are less resistant to discounts and Groupon offers, but still must think about what types of customers they are targeting with such deals. Photo printing and custom merchandise retailer Shutterfly Inc., No. 67 in the Top 500 Guide, has run at least three different Groupon offers, including for discounts of roughly 50% on personalized calendars and 66% discounts on photo books, says CEO and president Jeff Housenbold. The main reason to offer such deals, he says, is to acquire new customers lured by the discounts.

“75% of our revenue comes from existing customers, and that base grows every quarter,” he says. Paid search advertising and affiliate networks generally have been among the top ways to win new customers. But with some 60 million Groupon subscribers worldwide, Shutterfly can hardly ignore such a large bucket of new potential customers, Housenbold says, adding that the e-retailer has sold hundreds of thousands of Groupon vouchers.

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