Books written by Ray Sullivan

Tuesday, 13 November 2012

Why Groupon's Grumpy

Shopping used to be so easy.  First there were shops - you know, those bricks and mortar buildings that used to sit in the high street.  Remember the high street, it's where you used to go before the shopping mall was built.

Then along came the internet and we all started shopping on-line. First it was books (remember then the clever eRetailers branched out and started to sell, well, pretty much everything.  Hence you got, and still have, the likes of Amazon and - er - Amazon.

But you can't buy everything at Amazon or any of its smaller siblings.  You can't buy a meal out for two, for example.  You can buy the ingredients and the recipe, sure.  Even the oven and stove top.  But a candlelit supper cooked and served by someone else? It'd spoil in the post, I reckon.

So for now, the bricks and mortar restaurants are safe from Amazon.  So are the paintball experiences.  And the group bowling nights out with the boys.  Then along came Groupon and its rival, Living Social.  They worked with local suppliers and struck deals that got you a meal out at a great discount, or perhaps four paintball entries for the price of three.  Plus the gadgets you just couldn't get in the shops, even if you wanted them. You get the picture.  And it was initially seen as the next big thing, hell, it was the next big thing but now a couple of years down the line it is getting a little jaded, for two good reasons.

First, the marvellous deals being offered worked very well, at least initially.  People found themselves going out for meals more often than they would have normally and buying gadgets that you couldn't get in the shops, whether you wanted them or not.  That kind of activity is only sustainable for so long - either until the buying public got real or went bankrupt.  Most of us got real somewhere along the way.  That doesn't mean we didn't have some great meals in places we might not have considered or had days out we might not have had without the deals.  It's not even that we haven't got some frivolous gadgets stuck in drawers, never to see the light of day ever again, that we wouldn't have had.  It's just that we all have a finite amount of disposable income, a markedly reduced finite amount five years into the credit crunch, and we're getting a little bit more choosy about the deals we take.

And as well as being choosy, we're not becoming loyal converts, in the main.  You see, the deals are promotions intended to expose us to new places, different menus, alternative activities with the intention that we will keep on coming back, deal or no deal.  The restaurants and gadget sellers accepted that some wouldn't return after the promotion, but they kind of expected someone to come back.  Unfortunately it's a human nature thing - once we spot something discounted we expect it to continue to be discounted.  Remove the discount and the public stand there and wait for the discount to return.  And why not, there's always someone else discounting, right?

The second reason is from the sellers' perspective.  Not only are the customers being really flaky, those great deals we all seem to like are actually even better deals in reality.  The £20 meal you get for £15 means that the restaurant only get, maybe, £12 by the time Groupon or Living Social have taken their cut of the deal.  So, in all probability, the retailers are providing your deal for no profit and you're not coming back until they repeat it. Understandably many are reluctant to provide food and services at cost for ungrateful customers.

So Groupon and Living Social are starting to struggle.  Retailers are not returning their sales force calls.  Understandably they are tackling the issue by diversifying.  The next big thing is acting as a portal for brick and mortar shops to extend their sales reach by providing all the on-line shopping tools.  A bit like eBay, Play and, you've guessed it, Amazon do already.

There are other discount stores starting up that have a model that is closer to traditional coupon techniques.  We're not as on-board with extreme couponing here in the UK as our cousins in the US appear to be, but we do get the concept of issuing retailer specific coupons to be redeemed against specific or general purchases in specific stores.  That appears to be the growth market, with electronic coupons being offered.  They can be targeted at specific demographs, sent  direct to their email or mobile accounts and can be redeemed in store using their smart phones.  OK, less fancy restaurant meals all round and the paintball team might have to manage with just three.  I'll sit it out, thanks, I've got coupons to look at on my phone.


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