How I Made $15,975 In A Week Using Daily Deal Sites To Do Market Research

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Last year, I was reading case studies on daily deal sites such as Groupon and LivingSocial, and learned that because of their success and rapid growth rate, there has been a lot of copy cat sites that popped up in the past year. Out of curiosity and boredom, I decided to study those deal sites and research on what people buy and each companies’ marketing strategies. I remember getting an email from Groupon that peaked my interest, Groupon Goods deals for Sky Lanterns, Up to 60% Off, $25 for $50 worth or $40 for $100 worth. After clicking on the deal, I saw that there were thousands of vouchers bought already since they launched the deal 2 days ago.

Sky Lanterns

Yup, I was very intrigued by this Gold Mine after seeing how quickly it sells despite the high price point they sold it for, and the fact that they claim it was a deal. Apparently the original price was $50, and deal price was $25 for $50 worth or $40 for $100 worth, so up to 60% off. To me, that’s not a deal. There is no way paper lanterns can be worth that much, but then again, it doesn’t matter what I think, because the market clearly proved me wrong. Take a look:

Groupon Sky Lantern Deal  

You know what was going through my mind at that point? “What the f***? No Way! How was that even possible?! It’s just paper lanterns, paperrrr, how popular can paper get?

That was literally my reaction after seeing the amount of lanterns that were sold in such a short amount of time.

Now, let’s just do some math here:

Groupon Sky Lantern Deal:

Over 10,000 bought. (we don’t know the exact amount, could be more, but I’ll do the math based on the 10,000 orders)

$25 for $50 worth (Pack of 10s), and $40 for $100 worth (Pack of 20s). (Not including shipping)

Sales:

Let’s say 5,000 vouchers were for $25 and 5,000 vouchers for $40

5,000 x $25 = $125,000

5,000 x $40 = $200,000

Total = $325,000 for that one deal run.

* Groupon typically take 50% commission: so half of that is $162,500

Pack of 10 cost about $7 to ship, and they charge $10, so they’re making about $3 for each voucher on shipping.

10,000 x $3 = $30,000

$162,500 + $30,000 = $192,500 (Total Sales)

Costs:

$0.35 for each lantern, so $3.50 for a pack of 10s.

(Pack of 10s) 5,000 x $3.50 = $17,500

(Pack of 20s) 5,000 x $7.00 = $35,000

$17,500 + $35,000 = $52,500 (Total Inventory Costs)

*** $192,500 – $$52,500 = $140,000 (Total Profit)

Not bad for one deal run. $140k in pure profit! Now let’s check out LivingSocial:

LivingSocial Sky Lantern Deal: 

1,368 vouchers were bought. Same type of deal, $25 for $50 worth (Pack of 10s), and $40 for $100 worth (Pack of 20s). (Not including shipping)

Sales:

Let’s say 684 vouchers were for $25 and 684 vouchers for $40

684 x $25 = $17,100

684 x $40 = $27,360

Total = $44,460 for that one deal run.

* Livingsocial also typically take 50% commission: so half of that is $22,230

Pack of 10 cost about $7 to ship, and they charge $10, so they’re making about $3 for each voucher on shipping.

1,368 x $3 = $4,104

$22,230 + $4,104 = $26,334 (Total Sales)

Costs:

$0.35 for each lantern, so $3.50 for a pack of 10s.

(Pack of 10s) 684 x $3.50 = $2,394

(Pack of 20s) 684 x $7.00 = $4,788

Total cost: $7,182 for the inventory

$26,334 – $7,182 = $19,152 (Profit)

Not bad for one deal run. We can clearly see that Groupon has a much bigger market share compared to LivingSocial

$140,000 (Groupon) + $19,152 (LivingSocial) = $159,152 for one week run deal. Clearly that company is banking!

Of course I want to test this out and do an experiment on it! Who makes $159k a week online?! So I researched to see how much the costs would be for these lanterns. Went on Alibaba and contacted a dozen of Sky Lantern manufacturers and found out that the cost is around $0.35 for each lanterns including shipping to the USA by sea, pretty good margin there. So I placed an order for 2000 pack of 10s for $7k. I then made a website using the simple drag and drop builder within BlueHost. SkyLanternFly.com was built within 10 minutes, then I contacted LivingSocial and Groupon, but sadly Groupon didn’t want new merchants for Groupon Goods. =( I did get an email from a LivingSocial rep from California, however after he heard that it takes 3 weeks for shipment, he didn’t want to do a deal with me. SIGH…… So I ended up contacting bunch of other smaller deal sites to do a deal run, I emailed them all with the link from Groupon and LivingSocial to show them the demand and the potential, and after signing contracts with them, we made an arrangement to run the deal after 3 weeks, gives me enough time to receive the shipment from overseas. The deals were launched for a week on these following platforms:

eversave

 

Eversave: Although not as big as Groupon and LivingSocial, Eversave has consistently been ranked one of the top savings websites, helping people save money with printable grocery coupons, free samples and great offers from national brands like Macys, Overstock and Pampers.

tippr-logo-large

Tippr: They offer deals for National Deals goods, restaurants, bars, spas, events and more. Has recently been acquired by Ncrowd.

 

 

DealfindLogo

DealFind – Also recently acquired by Ncrowd, just like other deal sites out there, they offer deals on services as we as online goods.

 

From these three platforms, a total of 1,585 deal vouchers were sold for pack of 10s, and here’s the breakdown:

Sales: 1,585 x $25 = $39,625

I was able to negotiate a deal for 60% – 40%, instead of 50% – 50%

So 60% of $39,625 = $23,775

Costs: $7,000

$23,775 – $7,000 = $16,775 (Profit)

Packing Sky Lanterns

After 3 hours of packing, I gave up, ended up paying $800 for my little cousin to pack the rest…..yeah….packing is not my specialty. Haha.

So that’s how I made $15,975 in a week. Was definitely a fun and interesting project.

THANK YOU SKY LANTERNS!

I still have 415 packs of 10s lanterns left in my parents’ basement in which my cousin sends out the orders that are placed directly from my website from now on. I don’t do daily deals on lanterns anymore because many competitors came in and drove the deal price down from $25 to $14, after commission splitting, there are now not much to be made. Not really worth the time in my opinion, will focus on my next project instead! =)

Editor’s Note: This article originally appeared on My Entrepreneurial Bug

About the author: Jolina Lio 

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