See These Facts Before You Start Selling on Deal Websites

As a small business, you look for many different ways to get the word out about your services and generate business. Many companies use the services of deal websites in order to bring extra customers.

One thing that many small businesses fall victim to is signing up for different deal sites. Most of these deal websites claim that you get to post a discount for your company for free on their site, which will help you gain customers and get revenue; the truth is they do more harm than good. Sites like LivingSocial, Groupon, and other daily deal sites are mainly around to help out consumers, not small businesses. If you are thinking about creating a deal for your business, look at the facts before agreeing to post on these sites.

See These Facts Before You Start Selling on Deal Websites

How These Websites Operate?

Groupon tells businesses they can quickly and easily set up deals through their site for free. While it is true that it is initially free to post your deal, they instead take a percentage of the revenue you get for the deals. Since they require you to offer at least 50% off so that customers get a good deal, you are already losing half your money. Then they take about half of what you do earn as a fee for advertising.

This means that if you sell a deal, say pay $15 and get $30 to spend on merchandise, and 50 people buy the deal, you would have about $750 in sales from that deal. However, after Groupon takes their cut off about half of your sales for advertising the deal, they write you a check for $350. While $350 may not seem too bad at first, think about it this way. If the 50 people who bought your voucher come in and spend only the $30 that the voucher is worth on a watch or some jewelry, that is $1,500 in sales. But since you offered the deal, and have already received the total amount of possible revenue, $375, you are now actually out $1,125.

The majority of daily deal websites work about the same way; they take a percentage of the money you make as an advertisement fee. They let you post a deal for free. But, then charge you when you make a sale because you used their services.

What About Selling Services on Deal Website?

Even if your business relies on providing services instead of selling products, you still run into the same problem. You are selling services with a loss of 75% of the total possible revenue. If you run a spa business and have employees who work for you, you would still be losing money. After running a deal that is half off the regular price, you still have to pay your employees their normal rate.

If this is your personal business and you are the only employee, you may find that you end up working for less than the minimum wage to service every customer who bought the deal. You also run the risk of stretching yourself too thin. So you can deal with the influx of customers, which ultimately is bad for customer service.

What About Earning Extra Customers From Deal Websites?

Besides losing money, you also won’t win over any extra customers. Most buyers of these deals are looking for only one thing: a deal. This means that they didn’t buy your deal so they could try a new place; they bought it because it is cheap. Also, most consumers have found that when they do redeem their deal voucher, the business has poor customer service.

This is almost a self-fulfilling prophecy. When customers come in and use their vouchers, employees know that this is the only reason why they are coming. Also, they know that they have no plans of returning. So, employees don’t work as hard to deliver excellent customer service. This then makes the customer decide that they definitely won’t return. Which, they normally don’t.

Most people who have sold deals on these sites find that majority of the people who bought the deal use their deal and then never come back, or were already loyal customers to their business, to begin with.

What You Can Do Instead Using Deal Website?

If you want to get more customers, as well as sell more products or services, your best bet is to offer the deals straight on your website, social media accounts, or newsletter. This way you aren’t splitting the money with anyone else. Your current clients or customers are more likely to spread the news about your discount, not the awesome deal they got using X’s daily deal service.

If you have a small business, something else you can look into doing is participating in different business showcases or local farmers’ markets. This will help you get your name out to local consumers. These customers are more likely to be legitimately interested in your services and become returning customers. If you have products to sell these are great places to showcase your best products and skills as well as hopefully make a few sales.

When you do go to different showcases or markets make sure you come prepared. If you have products you want to sell, have several different types so you can show your different skills. If you have services, like photography services, bring examples of your previous work and anything else that you would like to sell as well.

Remember that some people who are there may not have thought they would buy something and might not have cash or checks, which is where your phone comes into play. You can easily set up a credit card reader for your phone to easily take credit and debit payments. Some phone card reader providers let you customize your receipts so you can thank your buyers and leave an impression the right way.

Further Reading

Dragan Sutevski

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan