Friday, February 18, 2011

COD: Lifesta and the emerging Groupon "aftermarket"

Thanks to ad:tech for publishing this post first.

Anyone who gets even the smallest thrill out of shopping is probably familiar with buyer’s remorse: the notion that you can regret purchases after the fact. For me, it happens when I read about a book, rush to Amazon, and then later receive it and wonder, “What made me think that I would sustain enough interest in Central Asian politics to read a 900 page tome about the political development of the ‘stans?”

Even better example, especially because I love to make fun of myself. I once had a jacket that looked like a fireman’s coat. When it deteriorated to shards and dust, I tried to find a replacement. Sadly the brand had moved on to hipster schlock, so I went on eBay with the idea that I could buy an ACTUAL fireman’s coat and be even more authentically thrilled with its lines and warmth. You know where this is headed. I am now the owner of a 43 pound hyper insulated authentic fireman’s coat that would be too warm for Antarctica. Note to self – a fireman’s coat is designed to protect bodies from 1000 degree heat, not winter breezes.

As Groupon, Living Social, HomeRun et al continue to grow, there are naturally lots of people who buy deals and then find themselves less interested in redemption than they were in the heat of the click to buy moment.

For them there is the rapidly growing Lifesta site. Lifesta is a marketplace for reselling deals, connecting buyers and sellers and taking a cut of the transaction. While I heard at the outset of the group couponing age that redemption rates ran at 60-80%, that still leaves a lot of unredeemed deals. Clearly that’s what Lifesta is betting on. I also expect that redemption rates will fall over time as the novelty wears off and deals like this become part of daily shopping life.

Sellers can list their unwanted deals for a price they set. The deal stays up on the site for as long as it is available – until someone buys it or the seller withdraws it. When it sells, Lifesta takes 99cents plus 8% of the selling price. I’ll give a couple of f’rinstances for the math challenged. Lifesta gets:

$4.99 for a $50 sale
$8.99 for a $100 sale

Assuming you list for the price you paid these commissions are significantly lower than the restocking fee BS that major retailers have been adding to their return policies. While naturally many deals sell for LESS than their purchase prices, it would be hard to call Lifesta’s fees usurious. The user also gets instant access to the deal because the quota of respondents is already fulfilled and the item "delivered." No waitin'.

Buyers can browse listings by category and region, and pay only the selling price – all commissions are borne by the seller. Lifesta uses Amazon Payments for the transaction backend.

Let’s talk about the relevance of this for marketers. The development of a reseller market for these coupons will only serve to grow the group couponing phenomenon, as the cost of mistakes comes down considerably when you can get at least part of your purchase price back. As this buying model spreads, it’s reaching into populations that are likely a little more reluctant to plunk down money for services that they might not use. The availability of a venue on which to sell such deals reduces both the actual and the psychological risk of buying deals.

This may have implications as well on the structure and timing for your deals. Obviously the value of a deal on the reseller market is higher with a long expiry date. But the flip side is that surely we are going to end up with an environment in which some savvy businesspeople buy deals expressly for resale. So you will need to consider that as well.

But the trend may also mean that we will see less of the overwhelming swell of redemption that some businesses report occurs when they use Groupon and others. 300 people standing outside your store with printed deals flapping in their hands.

But assuming you take these issues in consideration, I expect that Lifesta and others will result in significantly more coupons sold – for good deals. More growth for the deal sites, and a nice business opp for Lifesta.

1 comment:

  1. The deal resale sites are pretty cool. I usually use, because they have the most options. You can bid on and make offers on deals. When you want to sell a deal you can auction it off, accept offers and also just sell it for a buy it now price like the other sites.


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