DealDown Thinks There’s Life Left in Beleaguered Daily Deals Sector

10/31/12Follow @jpruth

The first question that came to mind when DealDown in Brooklyn took its website public was, why dive into the daily deals market at this stage? Bigger names such as Groupon and LivingSocial have lost their early glamour, and the investor community—especially Joanne Wilson—has chilled to this type of business. Regardless, DealDown unveiled its public beta in September with an approach the company believes can gain traction where many have lost ground.

The prominent complaints marring daily deals come from consumers and store owners alike. Consumers can grow weary of being bombarded by e-mails with special offers at stores that may not be relevant to them. Merchants, who hope to attract new repeat business, might be doling out discounts to one-time customers who strike like vultures and do not plan to return.

Martin Mittelman, chief strategy officer and co-founder of DealDown, says the five-month-old startup is changing the model to be more social among consumers and to better favor merchants who offer the deals. Creating more repeat business, he says, is essential for merchants who look to recoup the costs of giving discounts. Mittelman says consumers typically “buy a deal at a spa once, then go back to the original spa that offers prices that they like.”

DealDown, he says, wants to mitigate this trend through rewards cards that give discounts of up to 15 percent off when customers make regular purchases at participating merchants. For now the service is only available at Brooklyn stores, but the startup plans to expand into Manhattan.

Mittelman says the idea for offering discounts to regular customers came from his own shopping habits. A local grocery store, he says, offered weekly discounts on orders placed over 30 days. That consistent discount compelled him to return multiple times, which acclimatized Mittelman to shopping there.

This, in turn, led to the rewards program established by DealDown. Participating merchants offer discounts that can be redeemed by customers who shop with them regularly over 30- or 60-day intervals, rather than the one-offs common to daily deals.

In addition to a different structure for earning discounts, Mittelman says the social component of DealDown discounts may also lure in more repeat business. Much like check-ins, Facebook friends are alerted when a DealDown customer grabs a new deal. He hopes this will generate buzz in the social sphere about the discounts. DealDown plans to add a wish list function, he says, that would let consumers’ friends see the deals the users are interested in. That would allow friends to potentially purchase the deals on the users’ behalf.

Prior to co-founding DealDown, Mittelman was an executive assistant to the CFO for B&H, a retailer of cameras and video equipment in New York. He says DealDown takes a 25 percent cut of the revenue generated by each deal, and the company is exploring other potential revenue streams. The company has raised more than $1 million in funding through angel investors. It is still very early in DealDown’s development, but Mittelman remains optimistic in spite of the reputation daily deals have garnered. “This market is wide open,” he says.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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