With Facebook Deals launching, it has me thinking about all these social group buying deal sites. We have Groupon, Living Social, hundreds of local deal sites, and all the Groupon clones. Google is set to launch their own competitor in ‘Offers’ and it seems likely more are soon to pop up.
Harnessing the power of social networks and the power of the internet to buy in groups seems natural, simple even. It seems like a great idea for everyone. People get a great deal, merchants get new clients, and all the marketing of the deals is taken care of by the deal site and by people using social networks to get the numbers they need for the group buy.
But, maybe it isn’t all it seems. In fact, Groupon and others like it just might be doomed. A study done of 150 businesses that used Groupon to offer a deal showed that almost half would not repeat the offer. Furthermore, nearly one-third of the businesses did not turn a profit with the deal. The sudden influx of new customers may appear good on the service, but it threatens the ability for some businesses to supply products and services at the same level they would normally. Being stretched thin by a temporary bombardment of deal users has left some businesses unable to service other potentially full paying clientele.
Even worse, it seems that less than 25% of Groupon deal seekers spend money beyond the deal purchase. Of all the Groupon users, only 15% came back to a place they used a deal at for a second visit. There is a very clear danger for consumers, with so many deal sites offering coupons, to be trained into waiting for the discount and even worse, following the discount train around town to whichever place seems to be offering one at the time.
Conditioning consumers to wait for the deal is a dangerous thing, just ask Macy’s. It can be great publicity and grab a bunch of new customers, but businesses have to be aware that it is temporary and to prepare for the sudden burst of business and the subsequent tail off. Preparing in advance to harness the publicity into something with more longevity might just be more important than any revenue that may or may not be generated through the deal offering.
In the meantime, it seems really great for consumers and until it becomes too difficult for businesses to maintain offerings like this, we have a smorgasbord of ridiculous deals to peruse!
On a side note, we would love to hear which of the sites you prefer and a brief reason why. Feel free to offer your opinion on which of the sites you think will reign supreme in the next year or two as well. My money is on Living Social, but Google Offers could be dangerous.
Now, go grab some deals or tell us about your most amazing deal find below!