The fact that PayPal is planning its entry into the daily deal space in the first quarter of 2012 should not come as a surprise to anyone. Ever since Groupon and Living Social came on the scene, many existing internet sharks must have been wondering why ‘this daily deal’ thing didn’t occur to them. In retrospect, what looks like a common sense “business idea” did not find takers in its first few months. In fact, it took Groupon to become one of the fastest growing internet businesses to get others to notice them seriously.
There is nothing in the consumer space that has grabbed the attention of people quite like daily deals has been able to do. Earlier Google, then Amazon and now PayPal (eBay Inc) have all been climbing the ‘idea ladder’ that pioneers of daily deals started. Amazon’s daily deals site is growing like crazy, claims Business Insider. No one would dispute that it would be easier for someone to run the daily deals with an established consumer base rather than the one who is growing its consumer base organically. However, winning the race depends on so many factors such as consumer interest, targeting, customer fatigue, less interest from businesses etc, but one thing is certain, the daily deal pie is getting smaller for all involved as new and established players join in to have their share. To think that this pie will keep increasing as more and more players join in is to think of a time when the only thing that sells is a daily deal” Will that ever happen? Only time will tell.
The fact that much of the world stays tuned on the internet is naturally making most businesses believe that the next big thing will only happen virtually. The fact is that the research in this space on consumer mind-set is limited. We do not know enough about how consumers’ behavior changes in response to persistent and multiple daily deals. Can the businesses sustain this? Would this be a preferred mode of spending by most consumers? Would businesses always prefer to earn their bucks through daily deals?
PayPal, however is partnering with some 200 merchants in US and they are looking at a pie that they think is going to be nearly 4 billion dollars. The idea is to serve the deals to you on your smart phone as you are passing by the stores. Even though PayPal claims that the deals are going to be ‘unique and relevant’, only the time will tell if this cuts any ice with the customer. How do they measure unique and relevant may still be hazy though. Who would drive past a market just to figure out what the best deal is out there?
One of the interesting aspects of this development is the concept of “mobile wallet” which is a mode of payment without wireless technology. That is you have your own PayPal card accessible through your smart phones and that card that has your name and identification number and can let you choose from multiple credit providers. It is too early to tell if this would have any impact on the daily deals offers, even if the trend catches on as an alternative way of making a payment.
PayPal is aiming to double its revenues in next two years and with a customer base of 103 million members, if the ‘daily deals’ is a hit for Pay Pal, it may be very much possible, provided that Pay Pal has calculated its risks carefully from someone cutting its predicted pie.
Source: Bloomberg
