July 21, 2011
Despite all the hype over daily deals among the public, vendors are less enthusiastic. According to a recent study of five deal sites, including Groupon and LivingSocial, just over half the vendors surveyed made money off their daily deal, and only 35.9% of restaurants/bars said they would offer future deals. Jeff Glazer, who owns a medical spa in Illinois, declined requests from dozens of deal sites because he didn’t expect to make a profit, but his business suffered anyway.
“Deal sites were almost dragging down the market price for the services,” says Ryan Leavitt, who founded a shipping and storage company in college with Glazer. “Why would someone pay full price for Botox or hair removal when they could get it for 80% or 70% off a mile away?” To tackle this issue, they teamed up again, along with management consultant Karthik Narayanaswami and social media strategist Venson Kuchipudi, to create the auction platform Deal Umpire.
The auction starts when vendors list a deal on Deal Umpire. Deal sites then bid on it, offering terms such as a better revenue split, lower credit card fees, or a longer deal, and vendors choose a winner. The vendors pay $10 to post deals, and the deal sites pay $99 if they win an auction.
Chicag0-based Deal Umpire cuts the costs and time that vendors and deal sites spend on negotiating, making it easier for small businesses to get in the game. Vendors can also compare deal sites side by side to find the best fit. “Deal Umpire puts power back into the hands of merchants. And they’re thrilled that they don’t have to talk to deal sites,” says Leavitt.
In the month since their beta launch, Deal Umpire has handled around 25 deals. According to Leavitt, they’ve also raised $100,000 from friends and family. Deal Umpire is based in Chicago and open to Chicago vendors only for now, but they have plans to expand to other major cities. If they succeed, they will be part of a growing space that serves the crowded daily deal industry, including deal aggregators and organizers.
To learn more, check out Deal Umpire at Tech Cocktail’s birthday bash in Chicago tonight, where they are one of our featured startups.
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