Small Business and Daily Deals: The Affair Is Over

This holiday season, Josh Neblett, co-founder and chief executive of online retailer GreenCupboards, plans to use e-mail blasts, Facebook ads, and joint promotions with suppliers to get the word out about his “eco-friendly” merchandise. One weapon not in his arsenal: daily deal coupons. “We did three different LivingSocial deals last fall, and at the end of the day it did not pencil out enough for us to continue,” says Neblett, whose 55-employee Spokane (Wash.) company had sales of $7.2 million last year. “The average net loss per order was significant, and the average customer we gain through our own marketing initiatives repeats business with us at a significantly higher rate.”

Add GreenCupboards to the growing list of small businesses that have soured on daily deals. Companies such as Groupon and LivingSocial make money by selling discounts for restaurant meals, manicures, and resort packages and splitting the revenue with the businesses. An October survey by Manta, an online hub for entrepreneurs, showed that 82 percent of 1,087 respondents do not intend to run daily deal promotions this year. Only 3 percent said such campaigns have garnered them repeat business, while 11 percent said they either lost or made no money on the coupons.