Groupon and LivingSocial were undoubtedly popular when they burst onto the scene, but now they are struggling to survive.
The two daily deal sites rose to prominence by offering discounts on local products and services, but are currently losing steam among consumers. And now they're both facing difficulty in trying to expand to other areas of e-commerce.
LivingSocial is testing a new "card-linking" discount business in three unspecified U.S. cities, according to Re/code. This would let customers at participating restaurants receive discounts when they pay with a card tied to their LivingSocial accounts.
Groupon, meanwhile, has debuted a revamped Merchant platform for businesses to manage their daily deals. Participating businesses can track campaigns, market through social media, and use new tools to create customized deals more quickly.
Both of these platforms could inject some life into the struggling companies. LivingSocial's plan could work because discounts and promotions remain the most effective way to convert shoppers, notes Nancee Halpin, research associate for BI Intelligence, Business Insider's premium research service. The National Retail Federation notes that 47% of U.S. consumers say discounts affect their purchasing choices.
But LivingSocial's strategy has a hole: it requires users to maintain their accounts, which is a problem considering that revenue and active users have been on the decline in the last few years.
The growth of e-commerce software and platform providers should support Groupon's plan. If successful in drawing in new customers early, then the Merchant platform could become a larger tool for online businesses outside of Groupon's site.
The downside of these new ventures is that both companies have had to drastically slash costs and operations to fund them. LivingSocial is laying off half of its staff just to stay above water, and Groupon cut 1,100 jobs last September in its international sales and customer service departments. It also shuttered operations in seven international markets.
This is a situation that bears watching in the next several months, as the two discount companies clearly need to do something to change their fortunes. On top of that, the entire e-commerce landscape has been changing, and the companies within the space are rapidly adjusting their approaches to best reach their customers.
Cooper Smith, senior research analyst at BI Intelligence, has compiled a detailed report on new e-commerce strategies that looks at some of the top trends affecting retailers at each stage of the purchase funnel and how they're responding to those shifts.
Here are some of the key takeaways:
- Within digital, consumers are spreading out their retail purchasing across channels, forcing retailers to spread out their online marketing budgets. Paid search, affiliate marketing, and email all increased their share of e-commerce referrals last year, according to Custora.
- Paid search especially stood out as a major source of spending by retailers. Search ad spending grew 18% YoY in Q4 2015, according to IgnitionOne.
- Mobile continues to drive the most sales growth for retailers, but sales still aren't keeping up with retail traffic. IBM found that smartphone traffic beat both tablet and desktop, making up 53% of all online traffic. But mobile still only accounted for 29% of all online sales.
- Retailers only have themselves to blame for underperformance on mobile, as many still aren't using best practices for mobile websites and apps. Only 60% of the top 100 global retailers currently have a dedicated mobile website, according to The Search Agency.
- The increase in online shopping has put stress on the shipping and logistics industry. The number of UPS ground packages delivered on time during the holidays fell from 97% in 2014 to 91% in 2015, according to ShipMatrix.
- Retailers are beginning to explore alternative shipping options. Earlier this year Gilt Groupe switched its primary ground shipper from UPS to Newgistics.
- Retailers that can't afford to invest in alternative shipping options are offering consumers more fulfillment options using what many of them do have — brick-and-mortar stores. Buying online and picking up in-store, also called click and collect, made up about 30% of e-commerce sales at Sam's Club in 2015.
In full, the report:
- Looks at how retailers are shifting their ad spending and marketing efforts to keep up with online retail behavior
- Identifies which channels are top performers for referral traffic and new opportunities for reaching consumers
- Analyzes how retailers are responding to the rise of mobile purchasing and where they're falling short
- Examines the evolving delivery landscape and the aggressive moves retailers are making to become their own shipping carriers
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