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Business Fads: Friend or Foe?

by fatweb

By Kate Pierson

We are a nation of fad-lovers in New Zealand — some might even say we’re a collective of walking clichés. Call us what you will, but we Kiwis live and breathe trends and if it’s hot right now, you can guarantee we’ve got it.

It may be that the sheep to human ratio in New Zealand has rubbed off on us, and we’ve adopted the follow-the-leader nature of our woolly counterparts, or it could be the fact we know a good thing when we see it. Either way, our inclination to become love drunk on trends is a Kiwi characteristic through and through.

Being kitted out head to toe in trends that have romanced the material girl that lives in all of us is one thing; but what are the dangers of adopting fads in our professional life? Is a business fad our friend, or foe?

Feeling the heat under the critic’s spotlight at present is a business model which is close to earning the title of ubiquitous as carbon copies of it pop up left, right and centre in our shopping sphere. Consumers’ two favourite things, online shopping and sales have come together and made a baby that has adopted the best of both their genes — she has been christened — “one day deal”.

And sure, she’s really attractive now, and the crème de la crème on the sales scene, but will she survive the transition from infancy to adulthood? Is her current popularity status her ticket to a life of longevity, or will the ephemeral nature of consumption trends knock the life out of her? Furthermore, will the fact that identical one day deal sites are being introduced like they are going out of fashion see them do just that?

A sustainable business?

For a long time our bargain crazy alter ego has been befriended by online shopping heavyweights like TradeMe and eBay. Now in the market mix, are online one-day deal sites where goods, services and packages are sold at a very tidy price.

In November 2010, journalist duo Frank and Muriel Newman aptly summarised the nature of these sites and their appeal to bargain hunters they refer to as ‘oily raggers’. “The age of bits and bytes, iPods and mice that click instead of squeak is a wondrous thing, and for the oily rag bargain hunter it has opened up exciting new frontiers.

“The age of electronic wizardry is especially good at bringing people prepared to sell stuff cheaply, with those that want to buy stuff for a whole lot less than you would normally pay. And this is why it’s of interest to those living off the smell of an oily rag.

“The latest ‘faditis’ to infect the cyberspace is the rise of grab-a-bargain websites. Imagine each of these sites as an enormous bargain bin that has lots of cheap stuff in it, all marked down by anywhere between 50 percent to 90 percent and you can see why they appeal to oily raggers.”

With regard to the sustainability of these enterprises, New Zealand Retailers Association chief executive John Albertson says one day deal sites are an interesting risk profile.

“In any retail business you need to achieve a margin to be successful. The issue with these sites is that the more you get of them, the more competitive each enterprise has to be. Of course the real risk is that if these businesses buy stock and they don’t sell it, they are stuck with it.”

Albertson also says the novelty may soon wear off if buyers are bombarded by offers in a spam-like fashion.

“Generally if people are hammered with offers each day from one site and then hammered with deals from another, they get over it pretty quickly which means one day deal sites have to find a way to keep their business fresh. It is like a retailer who has a blackboard with a different clever or funny phrase on it each day of the week. After one week, he will be wondering what to put on it.”

When it comes down to these websites buying just one or a few products to sell on, Albertson says it can be high risk because even the best buyers in big departments stores don’t get it right all the time.

One product hopes

“When these businesses are not buying a mix of products, they are really pinning their hopes on one product which they need to sell and this means they are betting they are making the right buying decision every day.”

Founder of successful one day deal site Firstin, Adam Brown, also has concerns about the viability of some other one day deal sites participating in the local market.

“Ultimately I know how limited the stock market is in New Zealand. Our business gets offered stuff all the time and we have a fairly comprehensive buying network overseas.

“We are fortunate because we do enough volume of sales and can therefore afford our margins to be thin.

“I just don’t know if some of these local sites will be able to have thin margins if they do not have the volume of sales.”

Brown says in his experience, at least 200 hundred sales per day is required to sustain an office space, internet connection and paying staff.

Despite the scepticism, figures for one day deal website GrabOne were published in December 2010 and it seems the company and New Zealand have been seeing green since its establishment.

Between its launch in July 2010 and December that year, GrabOne saved New Zealanders more than $10 million and brought Kiwis more than 1300 different entertainment, wining and dining and travel and beauty experiences across its 13 regions in New Zealand saving them up to 90 percent with each deal.

“In our first week of operation our customers benefited from $225,000 of savings,” GrabOne chief executive and founder Shane Bradley said of the enterprise’s success. “To have reached the $10 million mark in five months is exceptional – definitely beyond our expectations.”

Bradley says GrabOne was predicated on a business model that ensures everyone wins. But whether the other local brothers and sisters of this site can say the same of their own ventures will remain to be seen.

Needless to say, those considering investing in, or establishing their own one day deal site should take heed of the commercial maxim ‘Buyers beware’.

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