Why Daily Deal Sites may ruin your small business – one small business owners account of ‘the lure of the deal’.

Why Daily Deal Sites may ruin your small business – one small business owners account of ‘the lure of the deal’.

 

by:  Liz Duarte

This is my story and my experience with daily deal sites. I am simply sharing my story. I do realize the decision was mine to participate, it all happened very quickly and I got caught up in the frenzy. At the time I felt like a princess at the ball and had many Princes vying for my attention, before I knew it I was immersed in daily deal land without no way out, but to keep going.

Recently I’ve been reading various articles online about business owners who participated in Groupon or other daily deal sites only to end up thousands of dollars in debt, gained no real business relationship with any of their new customers, and feel duped by daily deal sites. It seems that may be a growing number.

In early 2011, my handmade jewelry business didn’t have the advertising funds or any budget for that matter to compete for rank on Google so I decided to give the daily deal marketing strategy a try. I’ve heard how this is the next level of online shopping, that all customers are always going to want to shop this way, no coupon means no sale etc., so I figured I would give it a try.

This basically says it all;

“The beauty of it is that it allows a business that’s never advertised before to hit markets and expand its business with virtually no risk and pretty low-cost,” explains Adam Schwab, managing director of DEALS. http://www.dynamicbusiness.com.au/sales-and-marketing/online-group-buying-big-deal.html

In 2011 I participated in my first daily deal promotions – everything seemed to go well and I was getting noticed, getting great response from buyers.That was soon to change.

In early 2012, I participated in 2 more deal sites, one of which “ deal site ” plastered a big logo on the ad for my website that said “Makes a Great Valentine’s Gift” .. ..What? This was not on the proof for the ad that I approved the day before. When I asked them, they said, Manager said he wanted it on there, and Manager also said, “don’t tell buyers your shipping time frame, we will just leave it on there and you try your best ok?” …..what? Valentines was just 2 weeks away, did they remember that I made everything by hand? At the time my website stated that I required 3-4 weeks for processing. They specifically told me to DELETE IT.

I don’t even know why I continued on with other deal sites after this horrible experience – as I type this I feel even more embarrassed than before.  It may sound tacky but I just love to make jewelry!  Some girls have an obsession with shoes, I have an obsession with being creative and jewelry making.

In March 2012, Another Popular Deal site approached me after seeing me on another deal site. ( At that point I was bombarded by salespeople – I had as many as 20 different deal sites contacting me and very eager to feature my business “right away!” ) I agreed to be featured. After they put together an ad for my website they told me I needed to create 500 voucher codes for buyers to redeem – I told them 500 was too many, and they said “don’t worry we always like to have 500 on file, you can just delete the ones that aren’t used”.

The feature went live in April 2012. I was busy processing orders I completely forgot to check their website and see how the ad was doing, so when I did, to my surprise, over 800 vouchers were sold, there was no cap placed – and they never suggested I needed a cap, nor did they show concern that a one-person, handmade business could handle that volume.

In previous deals I participated in I sold anywhere from 20 to 200 vouchers, manageable (except for the 2 week Valentine’s day deadline surprise) So I NEVER thought I would sell many more than previous deals, therefore selling 865 vouchers was way too many for me to handle– many of who wanted the order for Mother’s Day – just 4 weeks away!

I suppose it was my fault too, I should’ve checked in earlier, I could’ve put my foot down, but they always came up with great answers,  I assumed they knew what they were doing. Yes, they are not my business partner BUT I am their customer, is it not in their best interest to look out for me? Should they not have said, How is this mother of 3 children possibly going to complete 865 handmade orders by Mother’s Day? Nobody said a word, yet I had even more deal sites contacting me to be featured – especially after seeing the Teambuy deal selling over 800 vouchers!!

My website ended up crashing from all the visitors on my site at once. I had the daunting task to figure out which codes were used, which still need to be created. etc.. I was faced with many, many orders and an extreme, I mean extreme number of emails, so many emails that I could not answer them in a timely fashion. I had to put an automated email response message so people knew I was still alive.

Here is the real kicker! I have had several deal companies not pay me for all the vouchers sold (one deal site actually closed and went out of business without paying me one cent!) An already discounted deal to the customer, I must now also split 50% of the voucher price with the deal site, this means 75% off my retail price,  so when not reimbursed for the sales this is a real big loss. It is common practice to split the payout into 2 or 3 payments– so in some cases I was not paid for 2-3 months after the customer paid for the voucher on the deal site and in a few cases NOT PAID AT ALL! How can a small business owner operate without getting paid for discounted deals?

Deal sites are a great way to bring in traffic for your business, but be very careful with who you deal with, some are better than others., If you are going to offer a deal with them make sure you request a CAP on the amount you sell, in the off-chance you sell more than you can handle. (some of them will push you not to have a CAP or they will say the manager will not accept your deal if you have a CAP on the amount sold, which I have been told on 2 occasions.)

Also, think twice about offering multiple deals, when the vouchers are near expiry, many will redeem all at once.

It’s a good thing that I LOVE MY BUSINESS and I am grateful that A LOT of my customers have been VERY understanding,  I had one sweet customer tell me – “its your fault your items are so darn cute, otherwise we wouldn’t buy so many! “.  I have also had many returning customers.

I do apologize to my customers the lure of deal sites all vying for my business certainly got to my head and was much more than I could handle on my own. I was not very familiar with how the deal sites work, and only learned by trial and error, mostly error.

I certainly know a lot more now, and hope to pass the info on to other unsuspecting merchants / retailers before they get sucked in too. 

My Best,

Liz Duarte

updates on my blog: 
http://handstamped-jewelry.blogspot.ca

 Update: December 2012 – I am now caught up, processing time is back to 3-4 weeks or less, for ‘made to order’ jewelry. I do still offer ready to ship items which ship out within 2-3 business days.

Visit Related Links:

http://posiescafe.com/wp/groupon-in-retrospect/

http://www.retaildoc.com/blog/groupon-worst-marketing-business/

http://www.pcworld.com/article/229644/why_groupon_sucks_for_small_businesses.html

http://socialmediatoday.com/fgossieaux/550948/why-groupon-bad-your-business-and-mine

http://www.406strategies.com/2011/05/05/small-business-guide-to-online-couponing-2/

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