The 4 Types of Online Discount Websites You Could Start Find out more about the four varieties of sites that offer deals to consumers looking to save some money.
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This excerpt is part of Entrepreneur.com's Second-Quarter Startup Kit which explores the fundamentals of starting up in a wide range of industries.
In Start Your Own Online Coupon or Daily Deal Business, the staff at Entrepreneur Press and writer Rich Mintzer explain how to start a business in the competitive online and daily deal industries. In this edited excerpt, the authors describe the four kinds of online coupon or daily deal sites you could choose to start.
These are three common methods of offering discounts, with one hybrid that does a little of everything.
1. Online clipping services. These are websites that provide coupons that you would otherwise clip from a newspaper, magazine or a similar source (known as "clippers"). Examples include websites such as Coupons.com, CouponClippers.com or RetailMeNot.com. These websites post numerous coupons from all sorts of manufacturers or merchants and make them available to consumers online. Shoppers go to the site, see what they want and print out the coupons; they can then redeem them at their local stores. Note: When customers start printing coupons at home, they'll first download quick and safe software from the site. Once installed, they can click away and get a ton of coupons. Remember, it's illegal to sell or photocopy coupons.
This online method simply makes it easier than going through the myriad of newspapers and literally clipping coupons. Most often, clipping sites sort coupons by the types of products offered. Typically, shoppers can also order coupons, but that's only feasible if it's a product they don't mind waiting for, since shipping the coupons takes time.
If you run such a coupon website, your sources of income include:
- A small percentage from the use of the coupons
- Serving as an affiliate to an established coupon website
- Selling advertising on your website
- Membership to your site
- A combination of these revenue streams
2. Daily deal websites. The hot trend, as evidenced by Groupon and LivingSocial as well as Eversave and the eco-friendly Roozt, are daily deal sites, also known as group-buying sites. These offer deals that evolve through sales volume. In other words, the merchants offer large savings (often 50 percent or more) provided the website can produce enough volume to make it all worthwhile. Therefore, once the minimum volume, which is typically very low, if there's one at all, is reached, the credit cards of customers who purchased the deal are charged and they can print out their vouchers, which are typically then redeemed at the store, restaurant, spa, resort or wherever the merchant does business. Most of them are short-term "daily deals," lasting one to five days. The objective is to grab people quickly and get impulse purchases before time runs out. This prompts the popular "buy now while supplies last" mentality. Mobile apps have made these deals even more accessible to consumers who can make a purchase while out and about, and swipe their iPhones or provide the code on their mobile device to the merchant.
These sites can be a boon to business for the merchants or, in some cases, a complete disaster. Business owners need to know how to turn one-time visitors and impulse buyers into long-term customers, or at least mathematically make the deal work for them. While that's essentially "their problem," it becomes your problem, too. If the merchants don't return with more deal features on your website, you also lose business. Therefore, one of your jobs will be to educate merchants on how to benefit from utilizing your coupon website.
If you run a daily deal website, your sources of income include:
- A cut, usually around 50 percent, of each deal
- Selling advertising on your website
- Membership to your site
- A combination of these revenue streams
While coupon sites use several of these means of making money, revenue for daily deal sites is primarily, if not exclusively, from taking a cut of the deals.
3. Coupon referral and aggregate sites. These are sites that serve as a directory of sorts, pointing shoppers to where they can find deals, while helping various other coupon sites by offering a variety of their discounts all in one place.CoolSavings.com, for example, has everything from daily deals via LivingSocial and Groupon to coupons from manufacturers like Breyers, Betty Crocker or Pillsbury. By affiliating with manufacturers, coupon sites, daily deal sites and anyone else offering a coupon or discount, you become an aggregate or one-stop shop of sorts, with a database providing customers with many choices from which they can select the best deals. In an age of faster, faster, faster, you're essentially narrowing down the field for consumers who can look at your site instead of ten coupon or daily deal sites. You can even offer side-by-side comparisons of products from different websites. The lazier we get as a society, the more such aggregate sites will continue to flourish, provided you offer a great variety of savings.
If you run an aggregate site, your main source of income will be a percentage from the various other sites with which you're working.
4. Ongoing deal site. You could also be a deal site that doesn't offer "daily" deals but instead features ongoing deals to members. Members pay a monthly fee and have access to savings on a regular basis from a wide range of merchants. The savings can change and new deals can be offered. However, members have access to many companies at all times.
Access Development has been doing this for years with affinity groups. For example, if you're a member of an auto club such as AAA, and the club offers membership discounts, it's likely working through Access Development or a similar type of membership deal service. You can also do this with individuals who join as members for a low monthly fee. In this case, it's kind of like having a membership at a shopping club such as BJs or Costco, only in this case, your customers have access to more than 300,000 merchants from their computers or smartphones by use of an app.
If you run a membership site, your main source of income will be from the monthly membership fees.
