A lot has been written about the closure of 1-dayout.co.nz in the past few days. And I'm surprised at some of the claims made by its sales and marketing manager Race Louden in his recent article for StopPress, Getting the hell out of daily deal Dodge.
Louden claims the group-buying model attracts the wrong kind of customer to a business. There are always going to be bargain hunters. They’re a fact of life and who hasn’t been trying to save money in the past couple of years? Is this the start of the death spiral for the group buying industry? We think not. If so, someone had better inform Google and Facebook, which have just recently launched offer sections on their sites.
I cannot help but feel that this is a slight case of sour grapes. 1dayout.co.nz had less than three percent of the market in New Zealand and obviously never had the success they set out to achieve. In our case, many of our merchants are gaining new and repeat customers. If their local Yellow pages ad can bring in even a tenth of what a GrabOne deal can then, sure, there might be room for an argument. But unfortunately traditional marketing often has prohibitive costs and limited reach and most certainly doesn’t offer the sheer number of leads GrabOne can bring.
Many businesses struggle to attract new clients and with this model they have physical leads walking through the door. Not a click, an email or a call, an actual person. If a merchant gives that person a great experience, they may return at full price and tell their friends and family.
Louden states that "businesses are simply not often prepared for the sudden influx of customers as the result of the deal". We believe it is our responsibility as daily deal operators to prepare those businesses for this, guide them carefully through what to expect and advise them sensibly on the number of deals they offer. It is imperative that a merchant understands the optimal level of vouchers to sell; at GrabOne we will simply refuse to sell a deal for higher numbers than we can be confident our merchants can fulfill because we want our 'Grabbies' to have a fantastic experience.
I believe our success in part has been due to the excellent backup we have in place to support our merchants. We now have 68 people in New Zealand alone who work every day to deliver 30+ deals to well over 500,000 GrabOne members. In fact, we have more people manning the GrabOne helpdesk than 1-dayout had in their entire business.
Louden states the flaws with the model outweigh the benefits. I argue the flaws are not with the model but with the individuals running it. To succeed in this fast-paced environment you need to be adaptable, source great deals, scale the business quickly, work with your merchants and take care of your members. Unfortunately, I did not see evidence that 1dayout were able to do this. 1day has built a great business selling products to Kiwis, but they seemed to have struggled from the outset to grasp the fundamental differences between selling products and selling vouchers to service-based businesses.
This daily deal business model is not for short term players who believe it's as simple as putting up a site. You need strategy, a strong focus on customer service and the ability to build relationships, both with customers AND merchants. We have gone through thousands of iterations on our sites: fine tuning, evolving and creating a powerful and trustworthy ecommerce experience for our consumers. I believe 1-dayout struggled to keep up with the pace of the industry and didn’t adapt.
When people ask me if group buying is a fad I respond "as long as there are businesses looking for new customers, and customers looking for great deals, we are here to stay". We know we are becoming an integral part of our merchants' marketing plans. We’ve had around 40 percent of our merchants tell us they intend to reduce (or scrap altogether) some of the other forms of advertising they do.
In less than 12 months, GrabOne has sold 1.3 million vouchers, saved Kiwis over $51 million dollars and helped countless businesses gain more customers than we can count (and by the way, we’ll be launching our products site soon, so watch this space). To me, that's not a flawed model.