Online deal sites are loaded with opportunities to buy discount clothes, experiences, travel and services from both local and far away suppliers. Companies like Living Social, Groupon, Bloomsoot, and Gilt compete by marketing thier services to businesses that are either struggling or have extra inventory that needs to be moved out quickly and then marketing those items to site members at highly discounted rates. Groupon hit the Internet a few years ago and quickly became the fastest growing online deal site company in history. With tools that allow the company to customize the user experience, deals can be tailored to fit only the needs you have, and those deals will arrive in a steady stream each morning in your email inbox. As a registered user, if you like spa experiences let it be known upon sign up and in no time you’ll be receiving recommended salon and spa deals from within your area. The same goes if you like golf, or taking advantage of cheaper cleaning services. If you like to travel in style but can’t do it at high-style costs, Groupon even offers coupons for travel that bring hotel stays and package travel deals down by about half the price. Sounds pretty dreamy, doesn’t it? So what’s the catch?
Here’s the deal (no pun intended): the items that retailers tend to offer up to sites like Groupon are usually overstock items, or leftovers that need to be gotten rid of. Selling these products at a discounted rate is a much better option than not selling them at all. But, if you poke around online, often times you can find the same deal on a product elsewhere, making the purported deal, somewhat of a let down. When it comes to using coupons for travel on a sites like Groupon there are restrictions. Typically flights leave from only one or two locations, so getting yourself to the airport for take off is left up to you. Often times this adds up to an extra flight and lots of extra money and time spent. And, there are usually blackout dates. These issues and more are just the downside for the user. There are other things to be considered by the retailer who gets approached by Groupon and other companies like it. For instance, when striking a deal with a deal site like Groupon, often time the contracts aren’t designed with the retailers best interests in mind and it is the deal site that comes out on top. Sometimes a deal is so good that a retailer gets bombarded by a wave of customers all at once and it is hard to handle the influx of business. Also, the cuts that the deal site companies take can be pretty stiff.
After a few years of booming business, it seems that people may finally be catching on to the downside of deal sites. There is a flaw in the business model that stands to leave coupons for travel and cleaning flapping in the wind. On August 14th, Groupon shares fell by 25%. It seems the still slow economy is leaving people with less of a desire for discount spa treatments, and extra pairs of cheap jeans and shoes and investors aren’t happy with the slow down.
