DealsDirect scraps its unprofitable daily deal site DealMe: Internet

DealsDirect scraps its unprofitable daily deal site DealMe

By Cara Waters
Thursday, 25 October 2012

The DealsDirect Group has shut down DealMe, the group's daily deal site which has been running since 2011.


DealsDirect attributed the closure to the "maturing" of the daily deals and group buying space this year.


DealsDirect will continue to offer deals on product through, the group's online product store.


The group is also continuing to focus on growing its marketplace presence and further developing its business-to-business offering, Shoppers Advantage.


Michael McRitchie, DealsDirect's new chief executive, told SmartCompany the closure of DealMe is part of a review which has resulted in increased focus on the group's online product store.


"To be honest, I have recently joined the business and have been here only for two months full-time, I am two-thirds of the way through a full review of the business and I found the daily buying industry is becoming very saturated and the growth rates are not there anymore," he says.


McRitchie cites customer fatigue as a key reason for the site's closure and says there is no longer the same attraction for customers in receiving daily and regular emails about deals.


"It was not a profitable business for us and the assessment that we made was, given the industry dynamics, we are becoming a lot tougher and the capital required to turn that business around was not justified given the return," he says.


"Any capital investment we did make would be much higher on our online department store."


Telsyte senior research manager Sam Yip told SmartCompany the closure of DealMe is a sign of consolidation in the industry.


"I believe this is really to do with what model works best for that eCommerce company," he says.


"DealsDirect's physical product online store is really its core product and DealMe was a branch out to selling services, but that did not do so well."


Yip says the top sites in group buying generate $7 million to $10 million in revenue every month so it is a "very, very" competitive market to sustain growth and activity in.


"Sites that are going well like Scoopon and Groupon have really looked at their deals structure and are getting that mix right of leisure deals, travel deals, food and dining deals, health and beauty deals and product deals," Yip says.


Despite the closure, Telsyte is still predicting the group buying industry will reach $600 million by the end of this year.


"For a company like DealsDirect, they are a still big player in the overall discount channel. The closure of DealMe is just a refocus on where their core strengths are," Yip says.


This story first appeared on SmartCompany.

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