Black Friday: Daily-deal sites such as Groupon, LivingSocial vie for holiday sales
By Danielle Douglas,
Holiday promotions are heating up among group-buying and flash-sale Web sites, which are betting that bargain-hungry shoppers will forgo door-busters at brick-and-mortar stores for deep discounts online.
Daily-deal purveyors such as LivingSocial, Groupon and Gilt Groupe are rolling out scores of offers that surpass their efforts last season. But with economists anticipating marginal growth in holiday sales and traditional retailers pulling out all the stops to carve out their share, these rookie players may be fighting an uphill battle against more established online competitors such as Amazon and Wal-Mart.
“Daily-deals sites are still a small portion of the overall e-commerce landscape,” said analyst Sucharita Mulpuru of Forrester Research. “Because more people will be shopping online than in the past, they will capture some fraction of that spend.”
Online sales, she said, rang in at $176 billion last year, with Groupon capturing less than $2 billion of that total. “It’s unlikely [deal] sites will be greater than 1 percent of overall online holiday sales this year,” Mulpuru said.
But the fledgling industry of online discounters is aiming to grow aggressively despite the weak economy and could net an estimated $2.67 billion in revenue this year, according to Local Offer Network, which operates daily-deal platforms.
“We’re going to see tremendous progress in sales at [discount] sites,” said analyst Peter Krasilovsky of Chantilly consulting firm BIA/Kelsey.
Deal aggregator Yipit is projecting that consumers will spend as much as $100 million this year on daily-deal gifts, or 80 percent more than last year.
“There’s just a broader push by Groupon and LivingSocial to make customers aware that they’re an alternative to brick-and-mortar shopping,” said Yipit data analyst Unaiz Kabani.
Washington’s own LivingSocial made headlines this week with plans to offer discounts from more than 20 national retailers on Black Friday and Cyber Monday. Shoppers can spend $25 for a $50 coupon toward Verizon Wireless devices or shell out $20 for $40 to spend on Skechers sneakers.
“During the holiday season, gifting tripled amongst our consumers, so we used that learning experience to come up with this year’s offers,” said Maire Griffin, a spokeswoman for LivingSocial. (The company is headed by Tim O’Shaughnessy, the son-in-law of Washington Post Co. Chairman Donald E. Graham).
The company is looking to drum up excitement with a new slate of holiday gift boxes — each contains a themed collection of four local events and a voucher to use on any one option. Available in 10 cities , the restaurant boxes start at $50, spa offerings at $100 and travel deals at $200.
LivingSocial’s bigger rival, Groupon, is trying to trump the competition with its “Epic Deals,” including a private dinner party with chef Todd English or a trip to the taping of Ellen DeGeneres’s talk show.
At $5,000, the TV show taping and studio tour do not come cheap, but Groupon Senior Vice President Aaron Cooper said the package, worth $20,000, is a “once in a lifetime” gift.
“We’re allowing people to give experiences,” Cooper said. “We looked at what people were buying last year and have a good understanding of what gets them most excited.”
Groupon tried its hand at holiday sales in 2010 with the introduction of Grouponicus, a seasonal shop offering a collection of deals in 20 cities. The Chicago-based company, which raised more than $700 million in an initial public offering this month, has added more cities to the roster this year.
Not to be outdone, member-only flash-sale sites such as Ideeli and Rue La La having been flooding inboxes with alerts on Black Friday deals.
Rue La La, for instance, is advertising its “5 Days of Must Give Style,” with a series of sales starting at 11 a.m. every morning from Thanksgiving to Cyber Monday.
Gilt Groupe, the largest operator in the flash-site space, will launch new sales every three hours on Cyber Monday, offer free shipping on all purchases and host a series of holiday-themed sales.
“Black Friday or Cyber Monday is how we approach retail all year long,” said Nathan Richardson, president of Gilt Groupe’s subsidiary Gilt City.