Rue La La Sees Staff Cut Backs – Plans to Outsource Sales Force
Here we are less than two weeks into the New Year and the daily deals industry continues to show signs that 2012 may be the year that we see many deal providers throwing in the towel or at least making some significant cutbacks. The Boston Globe reports that Rue La La, a members-only flash sales site that launched in 2008, laid off 65 of its 550 employees on Thursday and will be outsourcing its sales force with an as yet unnamed company.
Rue La La’s parent company, Retail Convergence Inc will also be closing down another site, SmartBargains and merging it into Rue La La.
The Globe goes on to say, “Rue La La had been a drag on the earnings of its previous parent company, GSI Commerce, a division of eBay Inc. GSI bought Rue La La in 2009 in a deal valued at $350 million but in 2011 spun off Rue La La as a private company, with eBay retaining 30 percent ownership.”
Rue La La remains optimistic and in a statement said it has seen ‘‘dramatic growth with nearly $300 million in sales in 2011 and similar growth planned for 2012 and beyond.’’
Daily Deal Media reported on Rue La La last May when it was preparing to launch its daily deal site, Rue Local. At that time Mark McWeeny, Rue Local president said, “Our customers are very different from the coupon-clipping customer that frequents Groupon. They spend more than the average ticket, tell all their friends and they come back.”
It seems like something in that statement didn’t work out quite right.
Source: The Boston Globe
To Deal-Travel or Not? That is the Question
As the popularity of group buying grows, so do the number of industries participating.
A significant player in the industry is travel. Following in the footsteps of sites like Expedia, Travelocity, major daily deals players have teamed up with such sites, or stated travel deals of their own.
A few that come to mind: LivingSocial Escapes, Group Getaways (Groupon + Expedia = love), Travelzoo, TripAlertz, the list goes on.
Some of these sites put their own little spin on travel deals.
TripAlertz sets its prices to the number of bookings, and SniqueAway caters to those who are looking for luxury travel, and is available by invitation only.
Most deals are available for the same time as other daily deals, but you can book up to a year.
Aggregators are getting in on the deals too. Travel packages can be found on Yipi
t and Dealery (who consolidate them from other sites), but I personally, am a little wary.
Now, this is what puzzles me. In order to purchase a travel daily deal, would one already have to be looking for a trip? Or is it one of those spontaneous things? How many details are included in the deal description? Is there are a specific hotel that you have to stay in? Are there restrictions on airlines and flight times? As a travel snob (and crazy-planner-girl), I need to know these things!
I’m the kind of person who researches hotels, looks at reviews, location, whether I’ll need a rental car; there are so many things that go into travelling. Would daily travel deals work for me? Maybe?
Another factor that goes into the travel deals, is the essences of the group buy in general. There’s always a “tipping” point. A required number of people must buy the deal. So, if you decide you want this deal, you get all hyped up for it, make sure you have enough money on the credit card, and no one else buys your deal, you’re stuck at home, potentially never going on a discounted vacation.
Travel deals seem to work best for people who are spur of the moment and on a budget, but not stuck on a specific location. Before you buy a travel deal, check the hotel’s prices to make sure you’re really getting a deal. When it comes to travel, I find planning works best, but even I would be tempted by a trip to the Big Easy in the cold bitter days of February.
Daily Dealer Travelzoo Sees a Marked Improvement in Billings – Competition Intensifies
Improved billings – lack of loyalty – increased competition
November numbers are in for Travelzoo (NASDAQ ticker symbol: TZOO) and the company registered a solid 44% growth in local deals gross billings. This is a significant increase over October billings and places the company in third position trailing only Groupon and LivingSocial in terms of dollar gross billings for the month.
The TREFIS article states that they believe “a major threat to Travelzoo Local Deals is that its business model is very easy to replicate. This has spawned a large number of deal-based clone sites that provide similar discounts to subscribers.” The article also sources the Susquehanna/Yipit survey. In a nutshell, that survey stated that “businesses that have offered an online deal-of-the-day in the past aren’t planning to do so again in the next six months due to concerns on low rates of repeat business from new customers.”
It’s really the same argument that has been verbalized ad nausea. Low barriers of entry, more competition, and lack of customer loyalty…yada yada yada. Travelzoo is not stupid. They went into the deal space with their eyes open. The company continues to differentiate itself by leveraging its existing relationships with hotels to offer high-end deals. It also relies on its other travel-advertising and search products to boost volumes for its local deals segment.
Travelzoo continues to expand its local deal offers via the ‘Getaways’ business model. That platform produces a larger amount of revenue as the ticket items are typically much larger. Travelzoo contends that its approach to daily dealing is very difficult to replicate owing to its rigorous deal quality standards. We have touched on this in several Daily Deal Media posts how important quality standards are.
The TREFIS post re-iterates how competitive the social buying space has become. The article estimates that there are over 200 social buying site clones in the U.S. alone and over 500 worldwide. I think those numbers are way off. Our sources show somewhere between 400 and 600 U.S. sites and literally thousands world wide.
There is always the possibility of eroding take rates (percentage of gross revenue kept by group-buying platforms). Daily dealer Kgbdeals charges 15% from merchants verses the 40% charged by Travelzoo. Competitive pressures like those could lead to a decline in take rates charged by Travelzoo over time. In the meantime, the growth rate of this portion of Travelzoo’s business model continues to be stellar. I am looking forward to their December numbers as well as 2012.
Source: Trefis
Groupon replacing lackluster sales staff
No slacking allowed if you’re on the sales staff at Groupon. The daily deals giant is replacing the 
bottom 10% of its sales staff as it attempts to procure more lucrative deals from merchants to assure its continued growth. This is a step they hope potential investors will see as positive, in their mission to sell their IPO.
CEO Andrew Mason told investors in Boston that the action was designed to improve the quality of the deals, which would ultimately lead to Groupon’s profitability.
Groupon’s current sales force tops 4,800 according to the IPO prospectus.
As of the end of the 3rd fiscal quarter, Groupon had 143 million subscribers, but in that same quarter, only 30 million bought Groupons. The number of repeat customers from the second quarter increased
but the total was just 16 million. Merchants have also complained that Groupon didn’t help them maintain new customers. Instead the only provided one time bargain seeking customers that didn’t come back.
If Groupon doesn’t work on maintaining its repeat customers and pleasing and maintaining relationships with its merchants, it may make investors wary of diving into the IPO, and effect the company’s long term value.
“At the end of the day all they’re offering the merchant is the ability to cut price … you can cut price any time you want. You don’t need Groupon to do it,” said a portfolio manager whose firm manages more than $20 billion and who attended the presentation in Boston.
Mason doesn’t see it from that point of view. According to him, the merchants are paying for “risk free performance marketing.” He explains “They pay for customers through the door. You’re not going to get this from the yellow pages”.
He also stated that deals from new merchants make for a better experience, and there is some bias towards signing up new merchants versus repeat business with old ones. As part of their online IPO Road show, they say that only half the businesses that participated in the 3rd quarter, had done some previously.
Will the replacing of the sales staff help Groupon’s IPO cause? I supposed we’ll see when they price on November 3rd and hopefully start trading on the 4th.
Read more about this here and keep up with everything “Groupon IPO” here at Daily Deal Media
