This post has been part of my draft for almost 8 months now. For obvious reasons, I’ve not posted it. But now since I’m out of, thought of posting my point of view without any guilt trip.

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So to start off, daily deals industry actually started around end of 2009 where me along with a friend gave an early sort at it with all guns blazing. However, the industry quickly shaped up like typical FMCG industries where money is the biggest ammunition to stay afloat while revenue is out of volume sales.

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Now that’s not what a typical fledging start thinks early on or rather wants also. But that’s the nature of quick growing business models. So we got acquired & our fledgling startup got rebranded as DealsAndYou. That’s that.

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The sales pitch to the local businesses was simple – helping them in offsetting the un-utilized inventory over a period of time by giving deep discounts to walk-in customers. That worked – definitely it did. That’s why we see many daily deal companies raising multi-dollar funding to the tune of around $50 Mn in India aggregately in the last 2 years alone for geographic expansion, increasing sales footprint, ops cost etc with definite revenue base (I’m not getting into the debate of GMV vs revenue vs margins vs net profit etc).

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But the question is what problem did daily deal companies solve – after spending almost 2 years in the industry, I would say that they swayed away from the problem statement wherein they were supposed to help local businesses in offsetting under-utilized inventory problem.

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But this problem came up another set of problems – since daily deal companies were more like a destination portal for consumers who can pick & choose which deal to buy; so customers often bought those deals which has less riders, more easy on their wallet (i.e. more discounts), can be redeemed almost anytime based on their convenience etc. Now if we dwell into solving customers purchase decision, then local businesses issue takes a back seat – which is why there has been rants globally that daily deal companies doesn’t have long term sustenance or local businesses would slowly move away from such value props since its a deal breaker over a longer period of time.

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Now, lets understand what exactly local businesses really want which IMO daily deal companies can’t really solve with the present set of business metrics which is more biased towards consumer convenience (don’t get me wrong here – serving consumers & providing convenience isn’t wrong. Its just the way business models work in daily deals businesses).

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So for local businesses, daily deal models are slowly shifting from “need to have (N2H)” to “good to have (G2H)“.

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So to put it in black & white, local businesses actually want this:

  • Attract customers at lesser discounts (of course way less than what daily deal companies give i.e. >50%+)
  • Customers walk-ins almost 24X7 and not necessarily during those hours when customers want to come which is the late evenings & weekends because businesses are almost running full during those times.
  • Lesser logistical nightmare like contracts, signups, deal structuring etc i.e. something more flexible which takes care of unorganized nature of the local businesses.
  • Creating a pool of loyal customers & not being type-casted as discounted place.
  • Something which helps the local business shift demand to those times when they are actually dull or running slow. That ways, businesses can actually offset their un-utilized inventory problem.
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Now such flexible, easy & intelligent way of helping local businesses is kind of difficult for daily deal businesses to solve because of the business model paradigm (mentioned above) – but it is definitely is a huge opportunity at a global scale since the problem of unused inventory or lean hours problem is faced by almost all business.

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Hope this post helps many in understanding few more things than already said.

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Now I rest my case.

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Update: Medianama crossposted this article here.

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