Deal Radar 2010: RetailMeNot.com ,Melbourne, Australia

RetailMeNot.com is the flagship property of Melbourne, Australia-based Web development company Stateless Systems and one of the most popular coupon websites in the United States. Other Stateless Systems products are CushyCMS, a content management system powering over 50,000 websites, and Trendsmap.com, an application for visualizing Twitter trends in real time.

Stateless Systems was founded by Guy King and Bevan Clark in late 2006 following the development of RetailMeNot.com. King built RetailMeNot.com over a weekend after he spent an hour hunting through heaps of “spammy” coupon sites and forums but couldn’t find a coupon code that would work for his purchase. King had previously built the site BugMeNot.com, which enables users to bypass compulsory registration by sharing user names and passwords, and saw another application for this collaborative model in the online coupon industry. Clark came on board immediately afterward to help grow and monetize the site. The pair quit their day jobs shortly afterward to found Stateless Systems and dedicate themselves to the venture full time.

The most obvious value of RetailMeNot.com for consumers is that they can save money on items they buy. According to a survey conducted by the company, users save an average of $29 on an average purchase of $151. For merchants, the value is the millions in sales that come from RetailMeNot.com each month. The company estimates that merchants have generated more than $133 million through the site from January 1, 2010, to April 30, 2010.

The company also aims to make it easy for consumers to find more and better coupons with its collaborative model. The coupon website market was already fairly crowded when King built the site, but RetailMeNot.com was the first site to introduce the coupon-sharing model. The company says that by crowd-sourcing coupons and usability feedback, it was able to quickly build the largest aggregation of coupons on the Web. Users can also discuss deals and bargains, offer shopping tips, and vote on coupons others have shared, thus awarding the sharer points that can be used to win prizes.

The site is free to users, and anyone can add coupon codes to use at online retailers. There are also coupons to print, and users can enter their ZIP codes to find grocery coupons at stores within a specified radius. Offer portals on occasions ranging from back to school to Hanukkah allow for a targeted search. Merchants can display special offers through an affiliate network such as AvantLink, sponsor a category (e.g., clothing) for $200 a month, or buy advertising space.

In addition to the traditional circulars in Sunday and sometimes Wednesday newspapers, there are more than a few sites for online and printable coupons, including CouponCabin, coupons.com CouponMom.com, and SmartSource.com. Some have forums where users can share information, but none are built on the community model that RetailMeNot uses. The company says that in this respect sometimes it is better to know less going in; it is possible to disrupt established industries by not being aware of the limitations. By focusing on usability and avoiding what it considers self-serving tactics such as forcing click-throughs, RetailMeNot.com has built the largest user base in the industry, and the revenue has followed.

The company does not target any particular segment and says that the online shopping community dictates what is found on the site. King believes that last year the total amount of money spent online in the clothing/fashion segment overtook the amount spent in the computers/gadgets segment, and the visitors and content of RetailMeNot.com have mirrored this.

Not surprisingly, traffic peaks during the holiday shopping season. In 2009, RetailMeNot.com had its busiest day on Cyber Monday with 1,084,432 visitors. The site was used over 36 million times in November–December 2009. In April 2010, among the top ten most searched stores for coupons were Victoria’s Secret, JC Penney, Kohl’s, Amazon, Domino’s, Macy’s, and Enterprise. In addition to large national retailers, RetailMeNot serves about 60,000 smaller merchants. King and Clark say that RetailMeNot.com gained traction through users of BugMeNot.com, who helped to achieve the critical mass required for user-generated content very early on. Being on the homepage of digg on RetailMeNot.com’s first day and getting some positive early press were also helpful.

Stateless Systems is entirely bootstrapped. King and Clark say that since RetailMeNot.com has been profitable from day one, they can reinvest in building and launching new websites, almost acting as their own angel investor. Annual revenues are over $10 million.

The company says that traffic on RetailMe Not.com has grown at a rate of about 20% month over month since launch. This year RetailMeNot is working with focus groups to find ways to improve the site’s usability and to capture a larger portion of affiliate revenue: The company says that comScore reports that $29.1 billion was spent online in the November-December holiday season, and less than 1% of this spending was conducted through RetailMeNot.com, which it found surprising given the variety of coupons offered. An exit has never been the objective, but King and Clark will continue to examine any opportunities that present themselves.

Recommended Readings
Deal Radar 2009: Extrabux
Deal Radar 2010: BigCommerce
Deal Radar 2009: uTest

This segment is a part in the series : Deal Radar 2010