Niche Deal Sites Gain Ground

To Groupon and LivingSocial, both of which are quietly waiting for their highly anticipated IPOs, JDeal‘s 30,000 subscribers are almost certainly beneath notice. This seven-month-old Jewish-themed deals site that currently serves only Manhattan — a Los Angeles site is planned but not yet live — is hardly worthy of the mantle of Groupon killer.

JDeal is a part of a subculture of daily deals sites that have narrowly honed their focus to appeal to a specific niche. In the past six months, deal sites aimed directly at pet ownersgay menplus-size women, twenty-something urban “dudes,” and urban families, to name a few, have sprung up and appear to be gaining momentum.

“The niche market is viable,” said Jodi Samuels, JDeal’s co-founder, noting it is able to give merchants a better deal, taking a 30-40 percent cut versus the typical 50 percent from Groupon.

Groupon, the first in and largest of what is now a very busy and crowded space, is an easy target for complaints from both merchant and consumer sides. Merchants grumble about the coupon program’s terms — Groupon reportedly keeps half of the revenue from the coupons it sells — and consumers are frustrated by a steady stream of offers that don’t interest them or are not close by.

As a consequence, of Groupon’s 85 million subscribers, only 20 percent have ever actually bought a deal from the site. And Groupon’s revenues are about $14 per subscriber. On the other hand, 58 percent of JDeal’s subscribers have bought deals from that site, according to Samuels, and its revenues are about $19 per subscriber.

Although JDeal may or may not have a scalable model, its success in the daily deals space is evidence of the power of getting the right email to the right consumer. While the overwhelming majority of deals sites that have sprung up in Groupon’s wake are made in Groupon’s image by offering the broadest array of deals they can sell to the largest group of subscribers they can sign up, a subset of daily deals sites that address specific niches has staked out a small but interesting piece of real estate in the space.

Samuels said that if the niche makes sense, sites with as few as 20,000 subscribers can be profitable. “With a strong, clear brand, focusing on one city at a time, niche sites can have very high conversion rates,” she said.

There is very little chance that JDeal or any other niche deal site will, on its own, even register on Groupon’s radar. But as the niche market grows and consumers discover that instead of getting five daily offers for products and services that they don’t want, need and can’t get to, it is possible that as a category,they may begin to erode the monoliths that are Groupon and LivingSocial. Consumers are accustomed to purchasing the things they want and need at specialty brick-and-mortar stores. So it is not a leap of logic to imagine that they will be willing to check multiple niche market daily deals sites, especially when they are in the market for a plus-size dress, a kosher caterer or a pet carrier.

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