Daily Deals on Laptops and Smartphones
I just recently launched a daily deals website but my target products are high value products such as Laptops and smartphones. Now i'm working with retailers but the challenge is setting the discount percentage and the minimum buy in that can actually make this product a deal. For example, a Laptop that sells at original value at $500 will be discounted for $300. What do you think should be the minimum no of purchasers we should set to make this a deal.
Also is there a way to develop a software or an excel program to calculate ROI for each deal. I will truely appreciate your response.
3 Answers
Stanley are you the retailer in this daily deal website or are you marketing deals for other online retailers?
If you are the retailer, you will quickly learn that its not worth attracting the lowest paying customer. Use low prices to introduce new customers to your site, but not as your business model. For example, sell one laptop at $1 profit, while others at a fair market price. Advertise the Inexpensive laptop on ebay, and other places so that your visitors are attracted by the bait.
What makes a good online business is service, usuabilyt, policies, and reputation. Price is a factor after that. You cannot be too expensive, but being 5% below the average on most products has an advantage.
Plus from my retail experience (lots) i have learned often the customers that get hte lowest price, have the highest expense in customer service and sales effort, where the same is close for luxury buyers who allow you to make a huge profit. The sweet spot is your middle customer who has few questions but wants a reasonable price.
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Hello Frank, Please can you explain a bit on this "Plus from my retail experience (lots) i have learned often the customers that get hte lowest price, have the highest expense in customer service and sales effort, where the same is close for luxury buyers who allow you to make a huge profit. The sweet spot is your middle customer who has few questions but wants a reasonable price." – Stanley 14 years ago
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I used to be in the car business, owning a car dealership. After that I was partnered into some internet e-commerce sites (retail to the public). What I have learned from my experience in sales is that consumers who look for the best price are often the ones that are seldom satisifed. Physchologically I feel that because they are hunting for a bargain, they always tend to feel they may have gotten a better deal by waiting, bargaining, ebay, or different product. Some are highly educated, and look for a good deal... Those customers are your harshest critics because they have higher exptions. – Frank 14 years ago
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A smart strategy is, employed by car dealerships, and sucessful retailers like new-egg is to bait, and SWITCH. The concept is that you advertise a product to catch the customers eye. New Toyota Corolla for 13k (below dealer price). but when the customer visits, they usually are sold on a better model, with power windows, and a color they can stand for a few k above cost. In e-commerce the same model exists. You advertise a few products at or below cost (ebay is a good place for that). Then you resell to the customer, or upsell him any chance u get. The cheap buyer will still buy the promo – Frank 14 years ago
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..item, but your chances of making profits are better in this scenario. Also, with cheap prices people expect bad service, and the majority of consumers are left waiting "whats the catch". From a business owner prespective you need to calculate the total cost of making a sale (hosting, advertising, customer service, product costs, etc.). You dont want to undercut the market and your own profits as well. If you sell a DVD you buy for $10 for $13 dollars, after CC transaction fees, hosting, customer service, returns, and op expenses you will be left with little. Its better to advertise a .. – Frank 14 years ago
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certain title for cost, to expose customers to your store, then sell the rest of your items at market rate. This gives you profits, that you can invest in marketing your brand properly. Focus on customer service and retention. SELL VALUE not PRICE. Sell your companies culture, pricing. Invest in user experience. (WHY MOST PEOPLE BUY MAC). - Last if someone is selling a product for a low cost is likely that its a lesser quality product, a chinese knock off, comes with poor service, refurbished, or fly by night. Customers trust brands, thats why franchies in the USA do so well. – Frank 14 years ago
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Another scenario where prices may be low is when a manufacturer sells direct to the public and cuts out the middle men (retailers). Most manufactuers are smart enough to understand that retailers are their partners and dont subscribe to this model. This is why an HP laptop from HP.com is the same price or higher as the equivilant at BEST BUY. Best Buy gives them exposure for their product. Build your business based on service and the value of your company will be higher than that of those discount shops who never have $$ to invest in marketing or development... – Frank 14 years ago
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@Franky B. Thanks for your explanation. I fully understand your concept now. – Stanley 14 years ago
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No problem... Best of luck... and remember you can always make changes to your business model as things change. The important thing is to LAUNCH – Frank 14 years ago
Stanley, I think I get what you're asking. Your site is not an online retailer, it's a marketing service that promotes Daily Deals for other retailers, right?
Your site is like Groupon, Woot, LivingSocial, and BuyWithMe. You are something like an affiliate marketer in that you help to market retail goods and services at a big discount that is only profitable if you sell a minimum volume.
If that's the case, then yeah, you really do need software or at least a set of rules so that you can expertly calculate the deal proposals for your retailer clients. If Retailer A wants to move some excess inventory of laptops, they are going to appreciate your expertise in figuring out how to make a good deal that moves that inventory in bulk.
The Woot model is a little different than Groupon because Woot seems to have their one deal each day in stock and then it's gone and there is no minimum buy-in for the offer to work. Groupon is more what you are describing where a restaurant or some service provider typically offers a deeply discounted rate for one meal/session in the hope that it brings new people to try their service. Groupon's model might not work as well for your electronics because once someone buys a cheapass laptop, they don't need another one any time soon, so there is less repeat-purchase incentive for a retailer to deeply discount one purchase. Woot's model would work if your biz will be buying bulk and passing on the savings OR trying to liquidate overstock.
So here's my idea: you make a game out of it (yes, I'm a gamification consultant, so this is how I think). You price the electronics moderately but ramp up the discount for every XX additional committed buyers (they have to go through the shopping cart checkout, but won't actually be billed until the "deal" concludes). Once you reach "sold out" the discount price is as low as it will go, rock bottom. This motivates the buyers to share the deal and helps you get viral traction. So to move a stock of 100 $500-laptops, you start the deal meter at $350 and then you drop the price exponentially so the first few buyers don't make a big impact, but the 60th buyer, the 80th buyer, etc. cause big drops in price. The 100th buyer seals the deal and everyone gets the lowest possible price and all excess inventory is sold same-day.
Margins will vary by your retail clients but they will want you to advise them. Try deals, test, and see what works. Another trick is to post it as whatever price it was originally listed as (even if it has been on sale or is older now) so the discount start price looks more compelling. Once you have your site software and business rules (how to calculate margins for the different levels of buy-in) a developer can easily make you a semi-automated system to help you propose, sell, and execute your daily deals.
Hope that helps! :)
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Terrific idea IMO! Just from a technical perspective, you can always pre-auth a purchase for amount X and bill for amount Y so long as Y – Patrickgamer 14 years ago
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Thank KellyRued, I will try deals first as suggested. – Stanley 14 years ago
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Stanley, yes I was thinking that it would be fun if everyone got the lowest price earned by all the other buyers. So if you buy-in at $350, but the price gets down to $200, you get charged $200. That encourages people who want to buy to get more friends to buy too. – Kelly Rued 14 years ago
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Also, I think it will be hard to do without an online payment system. What country are you in? Maybe you can structure you service so the retailers handle the payments but you just get them all the buyers (and the retailer gets automated emails from your system so their staff can process the payments and send an email back to your system to automate whether the payment is accepted or declined). Kind of wonky, but it could still be automated. – Kelly Rued 14 years ago
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@KellyRued, Trying to automate the system is really a big challenge for me. I'm based in Nigeria and because of the behaviour of few persons, we have been banned to benefit from international payment system like paypal. This has really gotten us the genuine entrepreneurs backward. My plan is to allow people pay into a particular bank account but that will only work if i operate the groupon model but the later model seems to be the best for electronic products. – Stanley 14 years ago
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That is tough (and I feel a little bit of your pain because I have some adult sites and Paypal also rejects legal adult sites with no history of fraud based on aggregate industry fraud rates... unfair but I understand why they do it). I googled and found some Nigerian payment processors (mostly working with main processor called Interswitch, such as this company: http://www.netnaira.com/). Not being Nigerian, I'm not sure if merchant accounts are available through your bank or if that is an uncommon service. Another option might be an American partner company to handle the actual transactions. – Kelly Rued 14 years ago
Thank you for your reply. My site is a marketing service that promotes Daily Deals for other retailers. First i want to know if it's possible to even get bulk laptops from a particular manufacturer at a very discounted price like 50% off. What i see most manufacturers do when they give discount is that they tie this offer to another service which most be obtained along with the product. For example verizon gives a discount of almost 60% on blackberry but tied to a data plan which you most buy.
Is there a website that offers deals on electronics, i haven't really come across any. Please if there is, a link would be appreciated.
Also KellyRued, from your model does it mean that everybody pays the same price at the end even those that starts the deal with $350.
Another challenge i will be having is my business location. There is no effective payment system yet for my country and i can't use paypal so i planned doing everything manually.
Also how then do i present my business proposal to this retailers?
