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The certain death of the daily deal

Aug 15, 2012

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The Groupon logo is displayed on the company’s website. Credit: Scott Olson/Getty Images

Daily deals seem to be on their way out. Their demise is heralded by the recent fiscal failings of Groupon, the site that sells discounted package deals for anything from spa trips to burgers to reading glasses. Critics of Groupon have been vocal about what they see as an inherently flawed business model.

Articles at varied news outlets like Slate, Forbes, Esquire, and even The Christian Science Monitor have voiced one opinion: Groupon has no future. Most of these critics cite the fact that there’s no barrier for competition. Companies can, and do, exactly what Groupon does. It hasn’t created enough of a niche for itself. These same critiques can be applied to any site that features a daily deal or package sale similar to Groupon.

The main reason for their demise? The competition can’t be helping, but it is the very nature of the deals that do them in. Groupon and other sites rely heavily on the merchants that provide them with those incredibly discounted offers, and the deal sites have very little to bargain with. Groupon lures businesses—often cash-strapped ones—into the deal by promising increased exposure and customers who will spend more than their coupon amount.

However, the company doesn’t keep any statistics to back up these claims. Businesses usually just end up losing 75% of profits to bargain hunting costumers unlikely to make a return trip. Groupon and others can’t exist without the businesses that provide their deals, and those businesses seem to be getting little out of the partnership.

Are you a daily deals customer? If so, how have you taken advantage of the offers? Do you return to the businesses you get deals from? If you’re a small business owner, have you been affected by Groupon or other such sites? If Groupon is on the brink, what can consumers do to protect themselves if they’re still trying to find a good deal?

Guests:

Matt DeBord, KPCC Reporter; writes the DeBord Report KPCC.org

Rawkesh Agrawal, writer for VentureBeat, appears on Bloomberg TV and CNBC and has contributed to TechCrunch and GigaOm

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