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What’s the Deal with Daily Deals?
Comments () | Published November 28, 2011

As consumers come to expect constant sales, they’re coupon-hopping from place to place looking for the best deal. As a result, merchants are working harder to give their new customers a reason to stay put.

“I was working 65 hours a week, from 8 AM until 2 AM,” says Harry Biscarr, owner of Allen Custom Frame, located near American University in DC. In March, Biscarr signed on with LivingSocial to offer $165 worth of framing for $60. He sold 985 coupons and just a month after launch had redeemed 220.

“In four weeks,” he says, “I received the equivalent of 12 weeks of orders.”

Deal customers had to select from current stock, which Biscarr admits to having “purchased at very little cost originally.” In preparation for the deal, he bought an additional 1,000 feet of molding. According to Biscarr, the average frame uses about six feet of molding. “I got rid of 1,500 feet of existing inventory,” he says proudly, careful to point out that because it’s older molding, the wood is of better quality.

He spent most of his time framing art posters, diplomas, and ketubahs, turning around new orders in six to eight weeks. He did the bulk of the work himself. “If you’re going to do a deal, you cannot rely on your employees to pick up the slack,” he says. Having to pay for more hands, especially if those hands work overtime, cuts into any profit he might see.

The long hours were worth it, he says: “I’ll retain at least 20 percent of customers. So if I do these deals four or five more times, I’ll have enough customers to never be slow again.”

See Also:

More Good Daily Deals

LivingSocial approached Judy Schlosser, owner of P Street Pictures in Georgetown, with the same deal offer presented to Biscarr. She declined. “I’m sort of jealous of Harry, but he’s got to put together 1,000 frames,” she says. “I don’t want to be a wholesale frame shop.”

Schlosser’s store has been a neighborhood fixture for 28 years. She acts almost as a family archivist in many of her customers’ lives, framing everything from birth announcements to college diplomas to wedding invitations. She recently lost her lease but is reopening a few blocks away as P Street Pictures on O.

“When you find a good frame shop,” she says, “you keep a good frame shop.” However, customers move away. “Washington is a transient place. We lose people through attrition.”

Hoping to attract new clientele, Schlosser was open to trying one of the daily-deal sites but was worried about going with LivingSocial because it wouldn’t let her set the price. “They promised me volume,” she says. “But if I had just volume, I’d be out of business.”

According to Professor Dholakia, smaller shops such as Schlosser’s can’t sustain a business on these conditions. “The discount being offered is too deep,” he says. As more and more deal sites compete for business, they’ll begin to offer better deals to vendors.

“Deals are going to get smarter,” Dholakia predicts. “Most businesses can’t afford to give away half of what they sell, so the deal percentage will go down. Maybe to 30 percent.” He also thinks deals will come with more restrictions.

Until that happens, Schlosser has found better terms by going with DC-based Deals for Deeds, a smaller site that donates a minimum of 5 percent of every purchase to a community nonprofit voted on by customers. With input from Deals for Deeds, Schlosser structured an offer in which customers paid $45 for $90 worth of framing. “I wanted to be conservative and didn’t want to do anything to hurt my business,” she says. “This was a safer bet.”

It was also a smarter one. “You can’t really get a custom frame for $90,” she says. “I’m able to upsell everyone.”

When the deal ended in March, Schlosser had sold 29 coupons: “Out of that number, I counted 19 new customers.” One, she happily reports, came in with five frame jobs and spent $600.

Schlosser says the attempt to get new customers in the door worked for her but that she won’t offer another deal through a site. She may instead offer her own deals—occasionally: “I don’t want people to think they can always get a deal from me.”

This article appears in the December 2011 issue of The Washingtonian. 

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Posted at 01:00 PM/ET, 11/28/2011 RSS | Print | Permalink | Comments () | Articles