There is a standard conversation I’ve heard many, many times among VCs and internet folks alike in the last six months: are flash sale websites and local deal websites a fad, or are they here to stay? I’ve heard and find merit with both sides of the argument.
One way to look at what is happening is to look at how these websites are or are not growing. In this case, I’ve used Compete PRO to compare the number of unique visitors across Groupon.com, Livingsocial.com, Gilt.com, Ruelala.com and Beyondtherack.com. Let’s take a look:
Now let’s take a look at the 2 year growth curve for some of the flash sale sites themselves:
What seems clear to me from these two graphs is that the flash sales websites are growing, but they are growing much more slowly than local deal websites. Is this caused by the relative complexity of the flash sales websites vs. local deal sites? Is the audience for flash sale websites inherently smaller?
A secondary question is whether these different types of websites actually compete with each other – or, more specifically – what would happen if a flash sale website started a local deal website. This is often discussed in the context of whether one of the flash sale websites can provide meaningful competition to Groupon. Now that we’ve seen a few flash sale websites launch local deal websites, it should be pretty clear who is winning. Here’s Giltcity.com vs. two of the local deal players.
Why isn’t Giltcity taking off? I would argue that the smaller core audience for the flash sales websites does not give them much to leverage into the local deal space. It would seem that the bigger threat would be if Groupon or Livingsocial got into the flash sales space (recognizing that they are unlikely to do so for a variety of reasons) than the other way around.
Can the flash sales website grow their user base? Does it matter? If they are driving huge profits from a small, dedicated base of people, do they need a larger audience to stay relevant? I don’t know. For myself, I’m suffering from flash sales website burnout. What about you? Are you burning out on flash sale or local deal websites? Let us know.
Damian Roskill is the Managing Director of Marketing at Compete. Before Compete Damian was head of products for a video start-up and has worked in start-ups for most of his career. Damian's career aspiration is to be at one with the advertising universe. Damian can be found on Twitter as Droskill, or connect with him on LinkedIn at http://www.linkedin.com/in/droskill