Groupon, LivingSocial and Daily Dealers are Touted as Black Friday on Steroids

With 365 Black Fridays a year, what are other retailers to do?

Going into the holiday season, the newest argument on the books suggests that daily deal sites, like Groupon and LivingSocial, are spoiling consumers by offering 50% or more off each and every day. This will make it even harder for traditional bricks-and-mortar retailers to wow shoppers with Black Friday door busters, according to Retrevo, a consumer electronics review site “It’s hard for today’s retailers to make their Black Friday deals stand out when shoppers have been getting significant discounts throughout the year,” Manish Rathi, Retrevo’s co-founder and vice president of marketing, said in a statement. “This new subculture of deal addicts isn’t easy to please, and they’re willing to hold on to their money until the right deal comes along. We’re concerned about the average retailer’s ability to provide high-caliber deals this Black Friday and even the rest of the year to satisfy this emerging subculture of deal addicts.”

Ellen Davis, vice president at the National Retail Federation. “[Daily deal sites] are Black Friday on steroids,” she said According to a survey conducted by GfK, a market research firm, 39% will use social deal hunting sites, such as Groupon and LivingSocial, to find the best bargains this Christmas.

It seems daily deal sites are most popular with the higher-end shopper. Accenture, a global management consulting, technology services and outsourcing firm, found in a survey that those respondents who subscribe to one of these sites, 54% have household incomes of at least $150,000 a year.

But daily deal sites are not big enough to put pressure on major retailers, at least not this year, said Marshal Cohen, chief industry analyst at NPD Group, a consumer market research firm. “We are still a year or two away from daily deal sites being a big enough force to challenge national retailers,” he said.

“I don’t think Groupon (or the other daily deal sites) will have much impact on shoppers participating in Black Friday,” said Jon Vincent, who operates the site BlackFriday.info. “I tend to disagree with Retrevo’s claims. While it’s true that Groupon (and others sites) provide daily deals, they are typically on items that you need to redeem in person, like $40 of food for $20 or 50% off spa services — products which are really different from what you see from the major retailers on Black Friday.”

“We don’t see [daily deal sites] having a huge influence on Black Friday,” agreed Brent Shelton of FatWallet.com. “Daily deals are regional, impulse buys. Black Friday is about planning ahead. [More than] 20,000 deals [are leaked] way ahead of time to build anticipation, allow shoppers to make comparisons and plan for a tradition of shopping madness for limited prices and quantities.”

While 2011 might not be the year Groupon and LivingSocial really take off as a go-to source for holiday gifts, they are already impacting how bricks-and-mortar retailers do business.

“We are seeing traditional retailers engaging in their own flash sales,” Cohen said. He expects more national brands to host these types of deals during the holiday season to compete with the daily deal sites and flash sample sales like RueLaLa.

Shelton also said daily deal sites will most likely have the biggest impact on holiday shopping when it comes to last-minute gifts.

Only a handful of national retailers like Old Navy and Whole Foods have actually partnered with daily deal sites, but experts agree we could see more partnerships form during the holiday season. “Right now, retailers are still trying out how to do business with these sites profitably,” Davis said. It will be interesting to see which retailers actually team up with the Groupons and Living Socials of the world.

While it’s hard to imagine the likes of Groupon and LivingSocial will ever have enough widespread acceptance to challenge national brands, Cohen said this is the same thing retailers originally thought about online shopping a decade ago. “Now look at the retail world,” he said.

Interestingly enough, one thing I have noticed is that Black Friday events seem to be starting earlier this year. Many major brick-and-mortars will be announcing sales beginning as early as next week with duration of two weeks verses the three day cycle. I have also noticed a major increase in marketing from companies such as Direct Buy (touting discounts of 30% to 70% representing 700 brands and over 1 million products).

Retailers such as Sears, The Home Depot, Lowes, and Best Buy count heavily on the November cycle. It will take some time for the daily dealers to tap into those walk in sales via vouchers. That in itself will certainly be a battle.

What about gift Groupons?

This is another big question that won’t be answered until after the year. There are certainly mixed reactions. On one hand, there are those that believe giving a daily deal as a gift is a social faux pas, while others say the experiential nature of daily deal offerings make unique presents.

The stigma associated with giving a daily deal as a gift is very similar to the trepidation originally felt by consumers when retailers offered gift cards as an easy solution to holiday shopping. Consumers were hesitant, believing a gift card was impersonal, but that mindset quickly changed, and gift cards became one of the top gifts for the holiday season.

I personally think a stocking stuffer of useable vouchers would make a cool gift. Ok, well, except for the 50% off Chia pet.

Stay tuned with us at Daily Deal Media as we bring you updates throughout this most interesting holiday season.

Source: The Street