Gary Gulman is one of my favorite comedians and he tells a story about the magic of finding a $20 bill. It makes any of us feel rich! He goes to Chipotle and is asked if he wants to add guacamole to his order for an extra $1.75 and he throws it on without hesitation. $20 can make us feel so wealthy we sling some guacamole as if it were unlimited and free, a powerful statement. Are we really just working hard in hopes of a little more guacamole? Perhaps.
The parable has an interesting parallel to the current state of the daily deals industry. The market came along at the perfect time, providing great discounts during a few year period in which we all felt financially nervous. Now that the economic recovery is well underway, we get a lot more confident in our future earning potential and give ourselves permission to spend a little more on the things we enjoy. Most of us are not buying Porsches or vacation homes with this permission, but we make small decisions daily that give satisfaction even if the price isn’t quite as great as before. We may not wait for the 50% discount to try out the new restaurant. We may spend the extra $10 at the new kitchen store in town without needing the coupon to come into the store. These are small, incremental buying decisions spread across millions of consumers that mean a lot to local merchants as the recovery builds.
So what does this mean for the daily deals industry? Will consumers stop waiting for a great deal across the board? We don’t think so. At SaveLocal we are seeing a couple of interesting trends that actually make us more bullish on the future of this industry.
Daily Luxury – As mentioned above, most of us are not buying up fancy sports cars just because we feel a little more confident in our prospects. However, consumers are starting to trade up. We are seeing the higher-priced offers from spas and med-spas, including microdermabrasion, Botox, and high-end massages, do really well these days. A 33% discount on a $300 treatment is a luxury that was probably overlooked a couple years ago but is making a comeback with a stronger economy. All are expensive enough that most folks probably aren’t going to buy them every week, but more and more are making the decision to invest in themselves once a month.
Lower Discounts – We are also seeing more deals do well with lower discounts. They might be 25% off a fantastic restaurant or 35% off a reputable retailer, but it doesn’t have to be 50% off any more. That’s great news for local merchants, as it results in more profit in their pocket. Any time the local merchant wins, we are happy.
More Campaigns – The trend toward lower discounts provides an opportunity for local merchants in two ways. First, the decreased profit pressure allows them to run offers on more types of goods and services, including those with a lower margin. And second, it opens up the types of campaigns they run to include both deals and coupons. Many merchants who only offered a heavily discounted product or service in exchange for an advance purchase are willing to give more flexibility to the consumer when there’s less of a discount on the table. We are expecting this trend to continue as the economy continues its recovery.
As you can see, guacamole is apparently the leading indicator of the future direction of the daily deals space. It is the perfect little upgrade into daily luxury that we can all afford. Very little discount needed!