Alabama Deals Site Puts Focus on Merchants to Compete With Groupon

Nate Schmidt believes the daily deals industry has a clear future — regardless of the struggles of publicly traded heavyweight Groupon. And he believes that future is local.

Schmidt, founder and CEO of the Deal Co-op, partnered with TheSuperDeal, a Birmingham, Ala.-based daily deals site, in August 2011 following Deal Co-op’s participation in TechStars Seattle. TheSuperDeal currently produces about $2 million in annual gross revenue and reaches approximately 40 – 50,000 consumers — Schmidt wouldn’t disclose the exact size of its mailing list.

“[We] have created, I think, the best example of local owning a top market,” he said. “Birmingham is top 50 — on the edge of top 50, but it’s a top 50 market. The largest deal that’s ever been run in the city has been run through us. On our best days, we’re the best in the market; on many days, we’re competitive. Groupon, LivingSocial and us are clearly the top three in the market.”

The key, Schmidt says, is a combination of relationships and technology. Schmidt first established relationships with area merchants about a decade ago when he created a local dining guide. Co-founded by locals Patrick Noles and former NFL quarterback Jay Barker, who led the Alabama Crimson Tide to a National Championship in 1992-93, TheSuperDeal already enjoyed a good deal of local recognition.

“Because we’re local here, because I’ve had a reputation for 10 years working with local businesses, because my partners Pat and Jay are here in the community — we just don’t run deals where we wouldn’t feel like we could go into the business two weeks later and have them be pissed at us,” Schmidt said. “We just don’t have the luxury of sitting in Chicago or D.C. and burning through merchants. It’s really about the relationships for us. A real differentiator is how we treat merchants.”

Schmidt says much of the time when the company is pitching deals, it’s not just a cold sales call — rather it’s a pitch to a business that someone that their team knows in some way: “We’re going to talk to people that we know because we’ve been in the community. There’s no doubt that’s been really important.”

The partnership has combined TheSuperDeal’s audience and Deal Co-op’s software, led by former ESPN programmer Mike Schmidt, Nate’s brother. The technology developed with InstaGift, another Schmidt venture, in 2007, leveraged online printable certificates and vouchers, allowing merchants to pay for marketing with food, clothing and other goods, not always money — or how the deals industry is currently structured.

TheSuperDeal and Deal Co-op duo has produced the most successful deal in Birmingham history — a deal for The Pants Store that offered consumers a $25 voucher for $50 worth of clothing, shoes or accessories. The deal sold more than 5,000 vouchers, attracted more than 3,000 consumers and totaled more than $125,000 in gross revenue.

Even without the global resources of the deals giants, Schmidt confidently speculates that TheSuperDeal, with the two-headed sales team of Noles and Barker and the technology provided by Deal Co-op, converts deals at two or three times the rate of Groupon. The key, Schmidt says, is developing and curating an email list that’s sourced naturally or through strategic partners — he has never paid for email addresses — and then building deals that operate on merchant-friendly terms, such as carefully constructed price points and voucher purchase limits to prevent overselling that could overburden a participating SMB.

TheSuperDeal has tested in a few new markets in hopes of locally-minded growth, with plans to expand into Tuscaloosa, Ala., site of The University of Alabama, and several locations in Florida.

From the Deal Co-op side, Schmidt is working on building out its software, launching a self-serve platform two weeks ago, which he calls the “best white-label technology on the planet,” that allows any local publisher or entrepreneur access to the technology behind TheSuperDeal to serve up deals to a local, targeted audience, or even take on Groupon or LivingSocial in a larger market.

“If you can go to a merchant and explain to them that you have the attention of a core group of their customers, they’ll find value in reaching out using daily deal-type mechanics,” Schmidt said. “You don’t need a email list of tens of thousands of people to see success. Oftentimes, several hundred very targeted and engaged people are much more valuable than a large random scattering of emails.”

Patrick Duprey is an intern at Street Fight.