Is Fab.com Foretelling the End of Daily Deals?

The site's latest move could be a bad sign for other niche players

   

In the wake of the financial crisis, a slew of innovative e-commerce companies launched, providing low-cost products using innovative business models like flash sales and daily deals. Some of the main players you’ve undoubtedly heard of: Groupon (NASDAQ:GRPN), LivingSocial, Gilt Groupe, One Kings Lane.

But there are countless signs that the trend may be a bit overdone. Most recently, and a further sign of that possibility came from the interesting startup Fab.com.

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The company was founded last year and has become one of the hottest in e-commerce. It started as a flash site that focused on high-quality products sold at affordable prices. And a big part of the business model was to be invitation-only, which created a sense of exclusivity and, more importantly, allowed Fab.com to provide ongoing e-mails to its users.

But now, Fab.com is making a pivot. A blog post from the company’s co-founder Jason Goldberg reads: “We have 10,000 products on Fab, and (users) shouldn’t have to log in to discover them.”

See, the company realized that the registration requirement was blocking it from getting customera. Many people came to Fab.com from Facebook (NASDAQ:FB) and Twitter, for example, but found it was cumbersome to sign up once they got there.

All in all, the invitation-only model seems to be getting tiresome for users. No doubt, this should be scary for companies like Groupon and LivingSocial. And the fact that the strategy is looking more like a gimmick and less like a business plan could mean that users all around are becoming immune to daily emails — and that they may simply go to alternative sites to get deals.

Wall Street seems to thinks this is the case; just look at the dismal performance of Groupon’s stock price.

That’s not to say daily deals will suddenly disappear altogether. Sure, there will probably still be a market, and that market will continue to evolve.

But the big question remains: Is it a niche or a massive market opportunity? More and more, it seems to be the former — and Fab.com’s latest move is only further proof. While there will always be consumers interested in newfangled online experiences, it seems to be a narrower audience than previously thought.

This is certainly good news for old-school e-commerce sites, especially Amazon.com (NASDAQ:AMZN). Consumers seem to just want convenience and low prices, and anything else probably just gets in the way.

Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/is-fab-com-foretelling-the-end-of-daily-deals/.

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