Wednesday, May 11, 2011

Are Daily Deal websites considered high risk?

Daily Deal websites are something I know quite a bit about as I work with some of the largest Daily Deal websites around. These guys process a significant amount of volume and quite honestly the chargebacks are extremely low considering the volume. So the question is, why in speaking to some companies, do they tell them that domestic processors are not willing or want to their business because it’s too high risk?

A few answers to this question.
1. They don’t understand it.
About 1 year ago, when the larger sites were just starting out, this may have been a good answer and a few of my clients had to really sit down with processors and explain the concept. If you get this answer from a processor today, then they shouldn’t be in this business. Anyone who doesn’t understand this business has been living under a rock.

2. There is a fear of high chargebacks from customers who aren’t happy with service they received.
If that is the case, then this is not a merchant that I would want to work with either. The Daily Deal websites that will succeed are the ones who place an emphasis on customer service. If a customer is not happy, then refund them. You would rather have that customer come back and be happy with the service they received, then not and of course you don’t want the chargebacks.

3. The merchant can go out of business after they sold all the deals.This is a risk that you have to take, but all these larger deal companies do their due diligence on the merchants to see if they can handle the huge influx of customers they are going to receive. I wouldn’t want to work with a deal company that will just take anyone, I will want to see their contract and how they board the merchants.

I do not in any way consider a daily deal sites high risk, as long as the people behind them are in it for the long term and are looking to build a sustainable business. Right now we are placing daily deal sites domestically at GREAT rates both in Canada in the US. For some of the larger sites we have merchant accounts at both a Canadian and US bank, and NO ISSUES AT ALL!

I strongly believe that the top guys will stay the top guys but there will be smaller sites that focus niche industries, which is definitely something we are seeing now.

As always, I am here to help if you are looking to place this business. Hit me up


JR

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