Group discount, Group disappointment.

Daily deals websites and the like have enjoyed a startling rise in popularity in the last few years. With sharp-eyed bargain hunters scouring a credit crunch landscape the prospect of a great deal is seemingly too good to miss.

Websites like Groupon, livingsocial and the annoyingly exclaimed "wowcher" are enjoying massive uptake flogging everything from driving lessons to dog toys. As a leader in the field Groupon has even managed to play hard ball with Google by batting off their $6 billion offering and go on to launch a succesful (if a little over-hyped) public offering which has seen Eric Lefkofsky laughing all the way to the bank (after cashing in a discount limo deal to get there). It has been estimated in the throes of 2011 success Groupon alone was gaining value at $20.8 million per day. Interesting to note though that his success this time has been based on a string of previous Business failures and an apparently enduring sense of arrogance when it comes to Business dealings.

But there is an ugly side to the daily deal. In cash-strapped times it would be nice to think that oiling the wheels of trade could only be a good thing. Customers try new things, retailers fill spare capacity, the middle man rightly takes their cut from the process and everyone is happy right? Well not always, perhaps there is a reason we have been selling things without 80% off their normal price for all this time..

Lets look at it from the consumer perspective. From personal experience cashing in a Groupon is much akin to plunging your hand into a bargain bin at a slightly less reputable supermarket. There are some absolute gems which you will be more than happy to have traded a little dignity for a good deal as you rummaged. Equally there are some less victorious discoveries that will make you rue the day you ever tried to save a few quid. A good example is restaurants. There are typically two reasons a restaurant will run a "come and try my food for almost nothing" routine. Either they have carefully considered the options, are confident on their service, and are taking a calculated risk that you will come back again so they can actually make some money. Alternatively the restaurant could be the most god-awful hell hole you will ever have the pleasure of eating at and you will be doubled up in pain or indifference for days after cashing in your 'megadeal'. Likewise by the nature of group buying and discounts, if you are compelled to sign up to a deal because it looks great, you had better join the crew of thousands of other in your area who are likely to come to the same conclusion. Cue virtual January sales-like queues of disgruntled bargain hunters who all want to cash in at once.

The deal operator does pretty well also, taking not far off 50% of the voucher value in many cases, they coast nicely in the middle with a minimum of customer service overhead and no actual production requirement to deliver any of the actual products or services which they have advertised to their loyal deal-hunting email list.


Whichever way I look at it however, I struggle to see how it ends up being good for the retailer. I am starting to think that it might be an elaborate and increasingly unfunny practical joke at the expense of the service provider who has to eventually honour the promise of massive discounts on their normal offerings. Take the example of the cake seller who got it all wrong. Rachel Brown knocked out a 75% off deal for 12 cupcakes from her delightfully quaint little bakery. Unsuprisingly her home baking appeal managed to notch up 8000 groupon sales. Of course these needed to be honoured and eager cake-munchers decided to cash in on much the same day leaving Mrs Miggins Rachel with over 100,000 cakes to bake. Naturally this caused chaos in the small village of Pontypandy and she eventually made a loss on every batch she sold. Blame who you like in this scenario, but all I know is the Groupon sales team who signed her up will have been working on a commission scheme that makes pyramid selling look like a jumble sale.

Likewise a custom furniture retailer called INFURN seems to have been brought to its knees by a 'big-boy' beanbag offer they ran in November which has turned their customer service to Mush and prompted a twitter and trustpilot outcry likely to leave them smarting from here until furnishing oblivion.

So its a mixed affair. Some winners but perhaps far more losers. It seems like retailers rarely go back for seconds once their offering has been devalued and their profits hit, so its very possible that one day in the future the middle men might just run out of backyards to defecate and we will see the end of daily deals as we know it.