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.
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.
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! :)
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?