Daily deals have been on a tear for the past few years. But it’s business model is no done deal. In fact, it might be a particularly opportune time to even stop considering them as the best thing that has happened in the marketplace.
Groupon, the grand daddy of daily deals, is floundering. Its shares are down 75% since its initial public offering as investors begin to realize it has too little technology and too much of the good old coupon clipping business. That, rightly, calls into question the potential, and future, of the daily deals business.
Enter a Sydney startup with an interesting alternative.
Slexicon, founded by school buddies Vito Grigorov and Andrew Iliadis, finds a lot more wrong with the daily deals. On top of their list is the high fees that are apparently killing margins and businesses – two-thirds of businesses that once participated in a Groupon deal suffered losses, according to a study in the U.S.
Keep it simple, silly
Grigorov and Iliadis previously ran a mail order business, an events company focused on high school dance parties as well as a charity project for deforestation. Somewhat belying their precious little business experience, the duo has put together a convincing case for a new model. It uses the good old SMS to drive bargains for consumers, and sales for businesses, but also significantly changes daily deals into more of a loyalty program.
“Each business is a brand, not a deal voucher. Slashing prices doesn’t generate long-term sales or loyalty,” asserts Slexicon.com co-founder Vito Grigorov. “Only direct exclusive communication with customers can have this effect.”
Slexicon has a simple method. Buyers can sign up on company’s website and “friend” businesses of their choice. They then begin receiving offers via SMS.
Businesses sign up with Slexicon and receive a personalized sticker that they can can placed on their front window or counter. As customers “friend” the business, Slexicon compiles individualised SMS mailing lists and sends out coupons and offers. Slexicon doesn’t say so but it obviously would take a cut of the sales.
Slexicon uses diverse media reports, studies and statistics to bolster their case. Take a look:
- 87% of the world does not use smartphones and among those that do, only 1 in 6 download apps
- SMS is the most immediate form of communication: 95% of the messages are read within four minutes
- SMS messages outperform mobile apps by 300% as a more effective solution for business owners aiming to increase sales and customer loyalty
- SMS response rates are at 70%, six times higher than emails
- Customers are 20 times more likely to shop again if a store has a loyalty program
- 90% of customers believe they have gained value from SMS loyalty programs
“With worsening business confidence and declining retail trading conditions unseen in 25 years, businesses are desperate for solutions to restart their dwindling sales,” Slexicon asserts, pointing to the retail slump.
Slexicon cites responses from diverse businesses that have used its service. Surry Zoo Clothing, for example, says it doubled sales since using the SMS service.
If nothing, Slexicon’s service may be a cheaper alternative to Groupon-style deals – the small business’ daily deals.