Monday, June 27, 2011

Discounting this and that and everything

If you're among a certain demographic, let's say 25-40, your e-mail inbox is likely filled each morning with the promise of great savings. It started with Groupon who was quickly followed by a slew of imitators. These companies found local businesses to offer coupons at discounts of at least 50%. Consumers quickly followed. Groupon was the fastest growing company since Amazon. Yet I thought, locally, we had reached a kind of tipping point in the last few months. The local places offering them were inching more and more away from Mpls/St. Paul. And few companies wanted to run the deals more than once because, frankly, they were losing money or barely breaking even.

I was strongly tempted to run a Groupon deal at the beginning. I thought it was a good way to reach a younger audience in a new form of advertising. I lost the vote here due to concerns about too little cash coming back and the possibility of our stock getting hammered in the week the coupon ran. Looking back, I'm glad we held off. Since then we've been contacted by no less than eight other companies running these deals. They all have a different slant with the same end result. The promise is an influx of cash(despite the fact that it comes in around 1/4 to 1/5 of cost) and new customers(some of whom were certain to become regulars). Anecdotally, through my personal experience and from talking to other stores who have run coupons, I don't believe the second fact to be true at all. Most users are bargain chasing and unless a majority of users spend way beyond the value of the coupon it's trouble for the retailer.

Word on the street is that both Facebook and Google are implementing their own bargain programs this coming Fall. Obviously the sheer numbers of people both of these groups can reach immediately dwarfs Groupon or LivingSocial, Crowd Cut, TC Daily Deals, Dealebob, etc. Recent reports are also reporting that Groupon is nearly insolvent as it stands and they're the most successful of the bunch. One has to wonder how long this can economically continue. It seems to be a failure sandwich with the only winners being the consumers in the middle of the sellers and the businesses.

What most concerns me, as someone in retail, is the continued idea that nothing should cost what it really does. We've become a discount nation and it would benefit us all if we remembered the old adage, "There's no such thing as a free lunch."

1 comment:

  1. Didnt you know? Everything is free now.