Are we nearing the end of the daily deals?

Manila Standard Today, Lifestyle | November 30, 2012

Once touted as one of the most promising web-based start-ups, Groupon is now just another flailing, if not failing, company that is speculated to go bankrupt if things don’t pick up. As an investor favorite from last year’s consumer-dotcom IPO boom, the future looked bright for Groupon. But its share prices have since been going down by as much as 80 percent due to what Wall Street analysts believe as the result of a declining growth rate.

LivingSocial, Groupon’s biggest competitor in the deal-a-day space, is likewise experiencing difficulties. For the first three quarters of 2012, the company, partly owned by Amazon.com, saw a 123-percent in sales but its net loss rose by 34 percent to upwards of $500 million.

A form of social shopping, the deal-a-day group-buying method is compelling for shoppers because of the massive discounts, typically 50 percent off and up. But that poses a huge problem for merchants. Consider a product that regularly retails for $100. Under a promotion, it would be sold at a discounted rate of $40 (for a 60-percent markdown). Then, that amount is split, reportedly 50-50, between the merchant and the host website, leaving the former to be left with $20—one-fifth of the original price. Heavier discounts, more excited customers. But less interested merchants, and, ergo, less customers.

Time.com reports that the daily-coupon model is slowly dying and isn’t expected to be resuscitated by the holiday shopping season because small businesses that used to be excited about the prospect are starting to shy away from the e-marketing strategy.

A recent poll found that four out of five vendors “have not, and will not, run promotions with Groupon or [similar] sites this year.” A separate survey indicated that 32 percent of partner-merchants lost money during their promotions while 39 percent believe that the coupons were less effective than their own marketing campaigns. In April, another study said that, while 48 percent of daily-deal customers continue to use the service just as much as they did when they first signed up, 32 percent don’t.

In the Philippines, Groupon is run by local affiliate Beeconomic at www.beeconomic.com.ph while LivingSocial operates under the regional Ensogo mark at www.ensogo.com.ph.