Mar 25, 2011

Retailers are becoming more savvy

As coupon sites like Groupon gain in popularity, retailers are becoming more sophisticated about how they structure their offers.

According to Elizabeth Baron in yesterday’s WSJ, merchants are carefully negotiating better revenue splits than they previously had, and tweaking their offerings to make deals work in their favor.

In typical deals, a retailer splits the revenue of a deal with a site like Groupon. For instance, a merchant might let buyers pay $25 for $50 worth of goods. Half of that $25 goes to the deal site.

More and more companies, burned by what they feel is a very expensive marketing cost, are negotiating to increase their share of the revenue split. Although some retailers lament that even with widespread purchase of their “deal” they were unable to make money, others laud these sites as “working wonders” for their business.

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