Why we turned off daily deals — A birthday message

Birthday FiveToday is the fifth anniversary of Wahanda.  While we officially launched six months later, it was Valentine’s day five years ago that we signed the incorporation papers and our first investment.  A lot has happened in those five years and we have grown tremendously over that period into the largest spa and salon site in Europe and like any five year old there are a few things that we have grown out of including, most noticeably, daily deals.

When we started Wahanda, our vision was to bring the spa and salon market online by making it bookable.   We realised that every other consumer vertical had sites that helped you book your services online but that for a number of reasons, the spa and salon market was still largely offline.  About 2 years into that journey, the Daily Deal phenomenon hit.  We saw that a big portion of Daily Deals being sold in the U.S. were health & beauty focused and since we were the largest marketplace for spa and salon services in the UK we were not going to let this go by without reacting.  We moved quickly and were the first to launch a daily deal product in the UK.

The initial daily deal period was fast paced and insanely competitive but it also helped build Wahanda and our profile in the market.  At the time it was a good offering for our consumer and we were careful to use it in a way that made sense for our merchant partners.  We built a large business in the area and were critically acclaimed for the quality of the work we did in the area. However, throughout this period we continued to build our vision of a spa & salon marketplace.  While many argued that Daily Deals “solved local” we argued that it was only one aspect and we continued to develop and grow our other parts of the business.

Specifically there were a number of elements of the Daily Deal model which we felt fell short of any true local marketplace:

  1. Push vs. Pull.  Daily deals are inherently an impulse or “push” purchase.  You get an email, you see a deal you can’t resist, you buy it.  But that is not how most of us buy our local services and especially not how we buy our health and beauty services.  If you need a haircut, you can’t sit and wait for a daily deal offering to show up in an email hoping it’s at a salon you like  — And, God forbid that you miss the email that day.  Chances are your hair will get very long and your roots will show waiting for the right deal.  What you really want is to be able to search (i.e., “Pull) for haircut near you at a place you like, at a price you like.
  2. Vouchers vs. Appointments.  Lets be honest, vouchers are a pain.  They make sense for a gift or if you want to “lock in the savings” but if you are buying for yourself, they just add an extra and unnecessary step to the purchase process.  Moreover,  you often buy the voucher and then forget about it.  Or even worse, you try to book yourself in but find that the merchant does not have the availability you want.  A true local marketplace lets you book the service at the exact time that you want when you book it.  You want to be able to wake up in the morning and say “I want a massage this evening at a great place near me” and be able to book it.  Afterall, what’s the point of buying something if you can’t have it when you want?
  3. Discounting vs. Yield Management.  Most local businesses are relatively small, have high fixed cost and low utilisation.  In the health & beauty market they’re 95% single owner operated and 85 % of their costs are fixed but they run at less than 50% occupancy — the biggest challenge these businesses face is utilisation. A discounted Daily Deal voucher floods a business with customers but it’s about the most crude form of yield management that anyone could come up with.  Unless you put A LOT of restrictions on the voucher, all those discount customers want to go at the same peak times as full paying customers and that simply isn’t what the business needs.  It leaves the business owner with one of two choices:  a) limit the amount of discount customers that you take at any given time which will upset the voucher holder or b) push out your full paying customers and hurt your profitability.  What business owners actually want is a way to fill the empty slots.  They want a steady stream of customers not a feast and then famine. They don’t want to have a blanket discount — they want to price the low demand periods more attractively than the higher demand periods.  If a customer wants to come in at an off peak time (e.g, Monday morning) they should pay less than if they come Saturday afternoon.  This is yield management and its very different from discounting.  Its a basic principle that has transformed hotels, flights and is starting to transform local services and a successful local market needs to give merchants the tools for doing just that.

So the whole time we were doing Daily Deals we were building a solution that did all of the above and gave consumers a better way to shop for their health and beauty services.  What we built was a site that did the following:

Discovery: enables consumers to search across thousands of  salons and spas near them whenever they need.

Comparison: read honest reviews, compare tens of thousands of services from full price to discounted and check availability.

Booking: book the exact service you want on the day you want and at the time you want.

As we approached our 5th anniversary, it became increasingly clear that we were maturing and that with over 1.5 million consumers per month coming through the site our transformation to full marketplace was complete.  Our core business had long surpassed the Daily Deal offering, our suppliers loved the new offering and consumers were happier buying what they wanted when they wanted.  So, like child needs to move on from using a dummy, comfort blankets and training wheels last October we turned off Daily Deals for good.  It felt great to grow-up a bit.

Happy birthday Wahanda.  I am excited about what the next 5 years will bring us.

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