Some Small Businesses are not Happy with the Daily Deal Rush

Groupon discount from a Local Merchant

Many small businesses now turn to daily deal companies such as LivingSocial and Groupon to draw customers and accelerate business growth. For example, with a Groupon promo code a customer can get a huge discount from a local merchant. Daily deal sites are becoming an increasingly popular tool many companies are using to promote their business. However some small business owners become overwhelmed by the rush for the deal. One of the reasons is lack of preparation: handling extra phone calls and e-mails requires additional human resources small companies may lack. For example, the owner of the Hillbrook Inn, the 10-guestroom bed and breakfast near Charles Town, West Virginia, who listed a one-night stay on LivingSocial with a 50% discount experienced a really mad rush. Realizing that poor preparation was the major problem the owner believes LivingSocial should better inform about what to expect and how to deal with the increased customers' interest. During six days the deal was listed on LivingSocial the inn sold nearly 500 one-night stays and the customers kept calling. Rooms filled up very quickly, and many vacationers couldn't redeem their voucher on the desired date because the inn was booked solid.

LivingSocial claims that they usually provide merchants with a welcome kit to help them prepare for the influx of customers as soon as the deal runs. Small business owners can find in it helpful recommendations on how to manage websites and phone systems, in addition to various opportunities for accepting the LivingSocial vouchers. Among the helpful advice from LivingSocial is conducting a staff meeting and possibly getting extra help to cope with the increased website traffic and call volume.

Unfortunately not all merchants have extra staff readily available to handle endless phone calls and e-mails. Some owners worry that discounted rates, fees paid to the daily deal company that may reach 30%-50%, coupled with the extra personnel costs, won't generate enough profit.

Groupon's main competitor, LivingSocial, was established two years ago in Washington. The company grew very quickly to operate in over 250 markets in 12 countries. Currently its value constitutes between $10 billion and $15 billion.

The U.S. is a huge market for daily deal coupon sites that continues to expand. The most popular of them is Groupon that has valued itself at $30 billion. Recently Facebook and Google have started offering users daily deals, as well. According to the data provided by Local Offer Network over 320 daily deal sites currently operate in the United States.

While some business owners have been overwhelmed by the business rush, most merchants were pleased with the results and acknowledge a great boost in sales. While some merchants may fail to get much profit from the initial deal they rather expect to promote their business this way hoping to attract new return customers who can make purchases later.

However a recent study conducted by Rice University reveals that only 19.9% of deal users come back after using a deal. This is because daily deal promotions are limited in their abilities to attract free-spending consumers and turn deal users into loyal customers.

Still LivingSocial and Groupon confirm that many merchants return to advertise daily deals again.