eBay set to take on Groupon with daily deals site

If the continual woes of industry leader Groupon are anything to by, daily deals probably isn’t the best space to be in at the moment. That’s not going to stop eBay giving it a bash though.

According to Reuters, the ecommerce giant has been quietly testing its own daily deals platform, called eBay Lifestyle Deals.

Over the past few weeks the service has been running on a trial basis in selected US cities, with deals covering everything from dog walking services to massages and private gym sessions.

“This is more competition for Groupon, but also more validation for Groupon’s business,” Arvind Bhatia, an analyst at Sterne, Agree & Leach told Reuters. “The market opportunity is big – that’s why you have Google, Amazon and now eBay committing themselves.”

“We have a big marketplace and a lot of people who come to eBay don’t just come for one thing – they stay and buy across categories,” Devin Wenig, president of eBay Marketplaces said.

“It makes perfect sense to experiment with new categories, and services is one of these things. We’re seeing whether deals and services are attractive to our customers.”

The platform represents a slight departure from eBay’s traditional business model, which is focused almost entirely on physical products.

The company has signed up with Google Ventures-backed Signpost, which arranges deals with merchants before posting them on a section of eBay’s marketplace.

The startup already provides deals for Google Offers.

“Signpost is a merchant, just like merchants selling physical goods on eBay,” Wenig said. “A merchant may sell local or even global services on eBay in the future.”

Using a third-party provider to organise the deals is the same approach that Amazon and Facebook have taken with their daily deal offerings and very different to the thousands of people Groupon employs to negotiate deals. Taking on the number of employees needed to compete along the same model would be a massive cost to shoulder for a start. It also means that it’s a lot easier to shut down the operation if things aren’t working out.

“For eBay, local commerce is very important; they already run “daily deals” on their Marketplace website, so extending this to local merchants and adding services to the mix is not a stretch,” said Colin Sebastian, an analyst at R.W. Baird.

“They can leverage their existing user base and provide a new distribution channel for merchants,” he added. “It would be another thing if they added a significant number of salespeople, similar to Groupon, but I don’t believe that is the case here.”