E-retailers must focus on their specific goals and examine a vendor’s reputation and market expertise, not referrals.
Those discounts contribute significantly to online retail sales growth, execs say.
The surge of online purchases through such sites, which offer time-limited deals (sometimes referred to as flash sales) on everything from clothing to gym subscriptions, was a large contributor to Italy’s double-digit e-commerce sales growth last year, says Alessandro Perego, co-director of the information and communications technology and management observatories at the Politecnico di Milano School of Management.
He attributes approximately one-third, or 400 million euros (US$533 million), worth of the country’s year-over-year online retail sales growth to deal sites and mobile commerce, with deals sites accounting for about 80% of the 400 million.
"The most significant of these two phenomenon is the boom in sites which sell coupons, headed up by Groupon which but also include Glamoo, Groupalia, LetsBonus, Jumpin, Poinx and Prezzo Felice,” says Perego.
Italian industry executives use the term “coupon” to describe what in the United States are typically called vouchers—that is, the right to a deal that a consumer pays for in advance. He adds that Amazon.com is also offering daily deals to build business and attract new online shoppers in the country.
"Flash buying is a new phenomenon which is worth at least 300 million euros (US$400 million) now, with the possibility of triple-digit growth for this young and booming industry," says Roberto Liscia, president of Italian e-commerce consortium Netcomm.
Middle-class women between the ages of 20 and 40 use flash sale or deals sites the most, Netcomm says, although young males are rapidly catching up. For now, Groupon is the daily deal king in Italy with 4 million consumers subscribing to receive its daily deals, followed by Spanish-owned web leisure discounter Groupalia, experts say.
Groupalia, which posted net revenue of 100 million euros, (US$133 million) in 2011 in Italy, says its top-selling deals have ranged from discounts at local pizzerias to low-cost spa treatments.
"Groupalia is proof of the popularity of coupons with customers,” says Andrea Gualtieri, Groupalia’s Italian country manager. “In just 18 months of activity in Italy, we have 3 million users. This mode allows consumers to indulge, even in times of crisis, to buy pleasant leisure experiences at substantially lower-than-normal prices.”
It’s the bargain-minded shoppers among Italy’s 9 million web shoppers who are most attracted to daily deals, often lured by claimed discounts of between 70% and 90% at a time when the economic crisis has many consumers watching their money carefully, experts say.
“As people try to maintain a quality of life, they are not going to pass up the opportunity of buying a spa treatment or meal half price,” says Boris Hageney, Groupon’s co-founder and CEO for Italy, Spain and Portugal.
As competition to capture these deal-minded consumers heats up, industry players are working hard to differentiate their offers, for example, by sending more personalized and local deals and hiring more sales staff to recruit additional merchants to offer discounts.
“We had 10 sales agents engaged on the territory when our Italian operation started,” says Alberto Vita, marketing manager for discount site LetsBonus. “Now, in less than two years, we have 100.”
Deal sites are also strongly targeting consumers with mobile tools in an effort to reach on-the-go shoppers, says Perego of Politecnico di Milano School of Management. For example, he says some deal companies allow consumers to load loyalty apps on their phones that track purchases and send personalized deals based on a shopper’s purchasing history.
The potential interaction between m-commerce and online deals is huge, says Riccardo Mangiaracina, head of research at the E-commerce B2c Observatory.
For example, a deal site could leverage the GPS capabilities in a consumer’s mobile phone to send shoppers targeted deals for shops near where they are at the moment. This would let a consumer purchase a deal and retrieve it right away. That's precisely the business model of Glamoo.com, a new player in the daily deal arena focusing on mobile offers.
In the U.S. deal operators such as Groupon and LivingSocial are both testing this strategy. In February, Groupon boosted its local and mobile commerce efforts with the purchase of Hyperpublic Inc., a local data supplier, and Kima Labs, provider of the Barcode Hero scanning app and TapBuy mobile commerce service.