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Searching for Value in Daily Deals…
I was reading a brief that Laura Locke published around daily deals. It got me thinking. Here’s my take.
There is recent talk about Daily deal sites like Groupon slowing down based on the growing sentiment that the people that buy deals are deal shoppers and not potential long-term business. So are Groupon-like sites in for some rough waters. It’s a great question. There are 2 parties necessary to make the Groupon model work. Consumers and businesses that offer the deals up via these daily deal sites. IF its determined that the businesses are not getting the marketing value out of the daily deals, then the cost associated with offer the deeply discounted products or services gets crossed off the marketing plan. Growth is great for all businesses big and small, but as Groupon recently had to disclose as part of its adjustment to its IPO filing, growing while spending more than you are making to acquire customers might not be a sustainable long term plan. Its one thing when you are spending investors dollars, but tell that to the mom and pop store selling muffins or the one person acupuncture shop that works for free fulfilling Groupon order for the next month. Think they will sign up again? Doubtful. Asking living social’s communication director if the businesses are happy is pretty comical. Ask my mom who worked 180 hours and lost money at her spa. If you mention the word Groupon she might reach for the wooden spoon she used to chase me around the house with as a kid. How many more moms helped to inflate that valuation? Millions?
No that shouldn’t be said that all daily deals are dead. Look at Rue La La or Gilt Group. Find waste and turn it into products. And then put time limits on it and let the shoppers fiend for the shirt, dress, shoes, vacation they just couldn’t justify when it hit the stores at full price. Here you have a never-ending supply of product, a never-ending supply of consumers looking to acquire for what they thought they could never justify buying. Here the buyers and sellers BOTH win. And in the end so will this model.
Communities offer huge opportunities for business. In commerce models, it will be the ones that take into account the long-term value for all the community members that will be successful. Fool me once, shame on you; fool me twice, shame on me!
One Response to “Searching for Value in Daily Deals…”
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Stephanie Storella
Well said Jon! I know several businesses that nearly shut their doors as a result of Groupon. In one instance, Groupon booked over 2000 clients as part of the campaign and the poor business owner couldn’t even book her regulars. It took a lawyer to get out of it. For the business that signs up with Groupon – regular and new (full) paying customers have less chance of getting an appointment booked. A colleague at a local spa brought in over 300 clients with Groupon. At the end of it all she made a net profit of $15.00. Not more than two of the “Groupon Clients” ever came back – they were too busy hopping on to the next “Groupon ” somewhere else. We are feeling this along with many other small businesses. The phones are just not ringing. A client came in yesterday to grab our special that ends at the end of the month. She is holding on to her other 3 Groupon deals from down the street that don’t end for another year. The deal was 3 treatments for $99 to our $60 for one. There is no way we can compete with that.
Last but not least, I heard on the news yesterday that Groupon is lowering yelp business ratings because the businesses are frustrated and the people cashing in their groupons tend to complain about it on yelp.