{"id":1577,"date":"2012-01-23T01:06:56","date_gmt":"2012-01-23T01:06:56","guid":{"rendered":"http:\/\/www.retailprophet.com\/blog\/?p=1577"},"modified":"2012-01-23T01:06:56","modified_gmt":"2012-01-23T01:06:56","slug":"is-the-deal-finally-done","status":"publish","type":"post","link":"https:\/\/www.retailprophet.com\/2012\/01\/23\/is-the-deal-finally-done\/","title":{"rendered":"Is The Deal Finally Done?"},"content":{"rendered":"

One short year ago, the hype around daily deals was electric.\u00a0 In the analyst community, you could barely get through a day without hearing something about players like Groupon, which happened to be growing at a meteoric pace.\u00a0 In fact, by the time of its initial public offering in 2011, Groupon was stating that it had reached full year 2010 revenue of $713.4 million, while only a year earlier, the company\u2019s revenue was $30.47 million \u2013 a year over year growth rate of 2,241%. \u00a0You read that correctly\u2026over two thousand percent growth in one year!<\/p>\n

\"\"<\/a>

Image courtesy of ViralBlog<\/p><\/div>\n

There was also significant debate about whether these deal sites were salvation or suicide for small business, who for years had battled large retailers with deeper pockets. \u00a0Many felt daily deals could be the playing field leveller, that allowed the little guy to achieve marketing reach on a budget.<\/p>\n

However, while consumers appeared to be prepared to jump on deals, many wondered what the actual redemption rates on deals were at retail.\u00a0 More importantly, statistics began to show that deals as a long-term customer acquisition tool were weak, with many consumers admitting to cherry picking deals and never returning to the store again.\u00a0 There were even a few horror stories of merchants being driven out of business by deals that went viral and exceeded all capacity to fulfill demand.<\/p>\n

My take at the time was regarded as somewhat contrarian. \u00a0\u00a0I felt that \u201cdeals\u201d were<\/em> not and never would become, a self-sustaining business but rather that, deals, discounts and promotions were and always had been mere marketing tactics. I felt that players like Groupon and Living Social, to name just a couple, had not invented a new business model but simply digitized an old tactic \u2013 the price cut – \u00a0that had existed since the beginning of time.<\/p>\n

If there was anything impressive about deal sites, it was perhaps the massive uptake they could achieve with their offers. \u00a0When Gap ran a $50.00 gift card offer for $25.00, \u00a0they sold half a million of them. \u00a0\u00a0It was like the difference between putting coupons on car windshield and dropping them from an airplane. \u00a0But the degree to which an offer like this actually paid off for the GAP is still unknown. \u00a0Groupons were notoriously difficult to measure at point of sale. \u00a0 Some argue that the offer did further damage to the already waning GAP brand.<\/p>\n

As consumers, we tend to be wowed by digitization.\u00a0 Digitizing things tends to make\u00a0old things look new and cool again but the shine wears off fast. \u00a0If there\u2019s nothing fundamentally new or game-changing about the concept, we lose interest quickly and move on.\u00a0And it would appear that many of us have gotten over daily deals. \u00a0Because underneath the shiny exterior, these were just coupons and does the world really need another coupon?<\/p>\n

Last week Techcrunch reported<\/a> that in the last half of 2011 alone, an unbelievable 798 daily deal sites folded.\u00a0 By the end of 2011, Groupon\u2019s share price had slipped below its IPO level, as the company was plagued with accounting scandals and reported retailer acquisition troubles. Some even began referring to Groupon as nothing more than a thinly veiled “ponzi scheme.”<\/a><\/p>\n

What lies ahead for daily deal sites is unknown.\u00a0 More may be born and almost certainly, more will die.\u00a0 A few might innovate and create real value propositions. \u00a0My guess however is that eventually the surviving deal sites will simply be swallowed up into larger online entities. \u00a0Every major player including Amazon, Google and Facebook will have a daily deal arrow in its quiver but they will be reduced to being nothing more than one of many marketing tactics available \u2013 not businesses unto themselves.<\/p>\n

UPDATE:<\/strong> \u00a0Following the posting of this article, I participated in a discussion with Natasha Mitchell, Host of the Australian Broadcasting Corporation’s Life Matters, <\/em>on the future of daily deal sites.<\/p>\n

Here’s the audio<\/a> <\/strong>of that program.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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