Daily Deal Overkill: Are Consumers Already Over Groupon and the Rest of the Flash Deal Sites?

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The thrill may be gone. After months of bingeing on daily deals and flash site coupons, there’s some indication that interest in Groupon and its competitors is waning. Why? The initial excitement has worn off, and consumers seem to feel both overwhelmed and bored by the constant onslaught of deals—which, folks are finally realizing, are just some silly coupons after all.
CNNMoney reports that since the start of 2011, online traffic to Groupon has fallen 13%, while the high-end flash deal site Gilt Groupe (which you know features swanky stuff because they put that fancy “e” at the end of Group) is down 22% from the beginning of the year.

Groupon has inspired tons of copycats, and perhaps the slowdown in traffic is due partly because competitors are taking away some customers. Perhaps these decreases are just a momentary blip, and Groupon’s numbers will soon soar again. Deal site popularity has risen in epic proportions in the past couple of years, with sales growing 60% in 2009 and 70% in 2010, and they were bound to plateau at some point.

On the other hand, could the decline continue? In a few years, will we all look back at the daily deal phenomena and think: What was the big, um, deal?

As it’s been said before, is saving $10 really all that exciting? Especially when you’re “saving” on a product, meal, or service you don’t really want?

After you’ve experienced “Groupon remorse”—in which the initial “What a Deal!” thrill is replaced by the depressing thought “Why did I buy that?”—it becomes clear that no one is saving $10 or $20 at all. Duh, what’s happening is buying, not saving. And often, it’s buying stuff that the purchaser wouldn’t otherwise be interested in if it hadn’t presented itself in an amusing, limited-time fashion in one’s in-box.

Of course, if the deal in question is for an item or service you’re genuinely interested in, then it’s great to get that $10 or $20 off. The problem now is that there are so many deals out there, it’s difficult for consumers to separate the true deals from the “don’t bothers.” A couple of consumers weighed in at the CNNMoney story:

“My inbox is inundated with sale emails that I delete. I don’t read them anymore because they all blend together”

“I delete at least 100-150 emails a day, most from sale sites,” she said. “Too many sales start at noon and I can’t stop in the middle of my day to buy things I don’t need.”

A side industry of sites such as Lifesta and Yipit, which round up dozens of flash deals for one-stop shopping, has arisen as a way to avoid in-box overload. But perhaps a better solution is to start ignoring flash deals, which have already come to feel like more empty marketing noise.

Groupon, the innovator and giant in the flash deal space, is already looking ahead to the next big thing: Last week, news came out that the deal site has plans for a new service called Groupon Now, which will offer consumers discounts in the immediate future—like half off at some Thai restaurant, so long as you eat within the next two hours. This could bring the concept of impulse shopping (or eating) to all new heights. Well, it could do so until the next-next big thing comes along.

Writing for Project Syndicate, start-up investor Esther Dyson explains why small businesses should probably be cursing the Groupon model. As the original concept had it, businesses would attract new customers through the use of discount coupons from Groupon or its many competitors, and at least some of those new customers would return even under non-discounted conditions. As Dyson writes:

But, in what seems to be an increasing number of cases, customers come for the deals, and then leave for deals offered by other merchants through Groupon. So the number of “new” customers attracted by cheap prices increases, and the number of loyal customers decreases as shoppers prefer by become “new” again for whomever offers the best deal.

This scenario works out for consumers—well, it works for consumers who actually use the coupons (a decent portion never do)—but not so much for the businesses involved. So Groupon, once considered the salvation of small businesses eager to connect to new consumers on the cheap, could wind up being the undoing of many small businesses.

For that matter, there’s no guarantee Groupon itself will be around for the long haul. Dyson foresees the strong possibility of Facebook taking the coupon/deal lead away from Groupon, along with a shift in the way businesses try to attract new customers, with or without the help of flash deal sites:

In the long run, they [businesses] will figure out how to do it for themselves, and Groupon and its competitors are likely to offer self-service, just as Google does for search ads. Merchants may well use intermediaries to reach consumers, but they are unlikely to continue to hand over such a huge share of the revenues.

So one day, your daily deal may not involve a daily deal site at all, but instead just the business you want to do business with. I think that fulfills my daily quota of repeating words and phrases.

Q&A: Groupon.com Founder Andrew Mason