The wolves in the business world are always on the hunt for blood, while the foxes in journalism are always pointing out where open wounds may potentially be. Such is the case with Daily Deals and particularly with Groupon, a company that defines the industry. Today, that definition is not good, and it’s only mostly their fault.
Just a few months ago, Groupon, Living Social, and the “daily deals” concept was the next big thing. Google tried to buy Groupon for a whopping $6 billion. Everything seemed to be soaring for the company and its competitors. The skies were as blue as can be.
Everything began falling apart shortly after that. Google, hot of the failed buyout, made Google Offers to compete against them. Once Groupon went public with their numbers as a first step towards IPO, what many considered a Grouponzi scam of accounting practices came to light. The bad press continued for the next couple of months before what would normally be considered good news has turned sour.
In the last week, Facebook and Yelp have begun pulling out of the daily deals arena. Competitors retreating is normally a good thing, but questions have risen about the viability of the concept. Traffic, as a result, has declined for the top two sites left on the field.
Despite all of this, everyone seems to be overreacting about the situation. Groupon may be every tech journalists favorite open wound to point out to the wolves right now, but there is still hope for the industry as a whole with or without Groupon.
A Changing Industry
What we have seen exploding the last two years in daily deals was simply the first major steps. The concept has been alive for a decade but has only reached its tipping point recently. Signs of weakness are making investors concerned and journalists hungry, but the idea is still a good one that simply needs to evolve.
There were problems. Too many people making too many calls to too many businesses created merchant fatigue. If you advertised in one, you were going to be called by 45 others in the coming weeks. The returns for many simply weren’t worth the trouble and many merchants are avoiding it altogether now.
From a consumer perspective, rumors of price-inflating by merchants (encouraged by daily deals and coupon sites) made all of the deals suspect. People wondered if they were truly getting 50% off or if they were simply buying it for the same price or a little less than they could have if the deal wasn’t on.
For this industry to succeed, there needs to be a focus on truth in pricing. Groupon and the others in the field have driven prices so low that the deals are becoming a commodity. As a result, the merchants are having to reduce their already-reduced prices to stay competitive. Most simply bow out rather than go down further. The promises of bulk haven’t always materialized.
Hopefully, in the next few months we will see the truth-in-pricing change. If the deals are real, the people will begin to trust them again and even start spreading the word more. From a sales perspective, more focus needs to be put on marketing and exposure rather than direct sales and unsolicited telemarketing.
Editor’s Note: For full disclosure, we put together a plan after analyzing the industry that was focused on incentives for both vendors and consumers. The plan was a radical change from the way that business is currently acquired in the industry and it would have worked nicely. Unfortunately, prior to rolling out the plan, the client that had commissioned the research went out of business. It’s a cruel, fast-paced world in social media.
If a company large or small changed their focus to acquiring clients based upon the potential for successful deals rather than focusing on those who have already tried other similar services, the industry could be saved. It’s a bold statement, but we’ve done the research. People want real deals. Many merchants are able to offer real deals and still be profitable, particularly by taking advantage of the bulk that is associated with the daily deals solution.
Search is an arena that nobody in the industry has truly mastered. It isn’t that social media isn’t a good venue. The biggest challenge is that social is an afterthought, a mental note. People do not go to Facebook or Twitter (usually) when looking for a local hair salon. Instead, they go to search. On search engines, the traffic sent is currently in-market; they wouldn’t be searching if they didn’t know that the wanted something.
By improving deal quality, focusing on search, and blasting through social media rather than telemarketers, any daily deals company would be able to increase both their profit percentages as well as their overall revenue.
As long as someone is willing and able to evolve to a deeper mindset, the entire industry can be salvaged now and flourishing soon. Otherwise, the foxes may win at pointing out the open wound. Unfortunately for Groupon and their competitors, the wolves are always hungry.
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