The daily deals market is likely to see consolidation and face demands to sign up to a code of practice, the head of Travelzoo’s Local Deals service has predicted.
Glen Drury, who will speak at this year’s Travolution Summit on October 11 in a digital breakdown session on the Local Deals business, conceded it was very easy to enter the flash sale market.
But he said while there has been a proliferation of deals companies in the US and Europe, spurred on by the huge success of Groupon, the challenge was ensuring they are maintaining quality.
And he said the increasing appetite for daily deals puts pressure on publishers that could lead to “sharp practices”.
“You need some checks and balances to make sure what you are saying is actually true,” he said. “That does not always happen and there is the potential for some sharp practices.
“It’s very easy to set one of these companies up but it’s not so easy to maintain. The quality of deals on many sites are not very good because they’re in this daily grind – they have to have something new every day.”
As well as pressure for a code of practice, once regulators catch up with the sector, Drury believes there could one day also be an opportunity for intermediaries to guide merchants around the various deals players.
“There is potential for having an agency that can help merchants to understand this sector and talk about the various players from a more disinterested standpoint.
“A lot of companies are struggling with all the local guys. There are 70 companies doing this in Paris. As a spa or restaurant it must be annoying to get hundreds of phone call from people looking for a deal.
”That’s where an intermediary may come in but I think we a long way from that because there is going to be consolidation in the market.”
Travelzoo believes its deals division is a more compelling offering than those of its rivals, a case Drury will put in a session at the Travolution Summit.
He says Travelzoo tests all of its deals to make sure they are genuine and that its database contains higher-value subscribers who are not necessarily just out for a bargain.
The Travelzoo subscriber tends to be older and more affluent than those on the databases developed by larger group offers players such as Groupon and Living Social.
“Ultimately it’s not really about deals but about how active your audience is. At Travelzoo we don’t have to send out these deals, we do it because they are great offers for consumers.
“It’s incumbent on the people working in this area to educate the market. The wrong way to look at this is what commission you are paying, that’s immaterial.
“The real question is are you filling the capacity you need to with the people you want?”
Drury said Groupon had grown so fast – it has been valued at $30 billion ahead of its planned IPO and is the fastest growing company in US corporate history – on the back of huge marketing spend.
But he said what no one knows is the degradation rate of its database. “Groupon are very demanding, they are very assertive as a business.
“We are more consultative. We are not trying to make someone who does not need to do a deal with us do one. Why would you want to replace a full paying customer with a discounted one?”
Travelzoo’s policy is not to offer a deal for more than 20% of the capacity a merchant has and not to feature an individual merchant more than three times a year.
“If a merchant needs the service more than three times a year you have to ask about the viability of that merchant.
“When you are deciding as a business where and who to advertise with you need to think about what capacity you are prepared to give up.
“We will work with merchants to make sure they are not driving more deals than they can actually deliver.”