Slickdeals: Treasure Hunting
Slickdeals is a crowdsourced, deal-oriented eCommerce platform.
One of the most interesting businesses I have come across is called Slickdeals, a crowdsourced, deal-oriented eCommerce platform. The website (www.slickdeals.net) boasts over ten million monthly active users (MAUs) and consistently ranks amongst the Top 100 most visited sites in the United States. Over more than a decade, Slickdeals has been focused on building a trusted online community that supports both retailers and consumers…
Retailers:
Slickdeals captures value through two business models targeted at the merchant: (i) affiliate marketing (primary) and (ii) advertising (secondary). The easiest way to describe the affiliate marketing business is to walk through a simple example:
Tom is a loyal Slickdeals user (consumer) that visits the website every so often to look for the “best deals” out there on the Internet. When Tom navigates to the Slickdeals homepage today, his eyes are drawn to a vacuum cleaner from Target (amongst 20 other great deals) for the extremely low price of $14.99 – this is surely a great deal, as the only way for a product to reach the homepage (a.k.a., Top Deals) is for the deal to have been validated (i.e., up-voted) by the passionate and skeptical Slickdeals user community. Tom clicks on the icon to read reviews from this same network and sees that not only does this vacuum model have great product reviews, but most others also agree that this is the best price out there! When Tom decides to make the purchase, a link will take him from Slickdeals directly to Target’s website to complete the purchase. Target can see that the purchaser has come in from Slickdeals (i.e., directly attributable) and compensates Slickdeals with a commission on the gross merchandise value (GMV), ranging from 3-15% depending on the category.
The affiliate marketing model has become increasingly important to retailers because “you only pay for what you get” (and don’t pay for anything else) – said another way, retailers are only spending advertising dollars (i.e., the commission rate) on purchases that are confirmed versus “spraying and praying” with television or digital ads, for example. This means that retailer spend on the Slickdeals platform has a guaranteed and high return on investment (ROI).
The secondary advertising business comprises common display and banner advertisements found in the borders of the Slickdeals webpage, which any company can purchase with the hopes of targeting Slickdeals’ ten million MAUs.
Users:
From the users’ perspective, Slickdeals is a “trusted online community dedicated to sharing, rating and reviewing deals and coupons…Through the power of crowdsourcing, Slickdeals enables consumers to discover and discuss the best deals on products and services across thousands of the most popular retailers” (PRNewswire). The most engaged users on the platform fall into the category of “treasure hunters” in that they have the compulsion to find and buy the best deals (just because) – this means that they visit the Slickdeals website not with a needed product in mind, but to discover. At the same time, these engaged users are inclined to share and comment on the best deals for “street cred” amongst the Slickdeals community, as nothing is better than having a deal you posted make it to the front / homepage!
Scalability & Sustainability:
The Slickdeals platform is highly scalable from a content perspective in that it is user-generated (i.e., extremely low-cost). By putting the onus of finding and sharing deals on the consumer (who is oddly engaged and loyal), Slickdeals is able to maintain a nimble operating team mostly focused on content moderation. At the same time, the platform is very sustainable across business cycles – in good times, consumers are willing to spend on items they don’t need (e.g., the cheapest power washer in the market); in bad times (i.e., recessions), users visit Slickdeals to purchase the cheapest necessities (e.g., bulk paper towels).
This sounds like a super interesting business that I have never heard of before! What’s interesting to me is how the services provided by Slickdeals interact with and compare to other retailers. For example, Walmart prides itself on every day low prices in a way that would make this platform almost moot. For other retailers like a Target, this would almost seem to encourage price pressure in a way that seems counterproductive. It almost seems like a way for those Target-like retailers to compete with the old bargain hunting value proposition of some dollar store brands or thrift stores. It seems like this business model would then only be sustainable for retailers if Slickdeals only stays small enough where it serves that thrill-seeking need and doesn’t grow to cannibalize traditional consumers who may be less price sensitive / higher margin for retailers.