Daily Deals Business Model In Trouble

So it looks like it’s time for a shake up in the world of daily deal sites like Groupon and Living Social and the countless other smaller local rip-offs around the world. It seems as though being required to offer massive discounts and then giving a huge cut of the sales to these deal sites is not something that merchants are willing to continue to do on a regular basis.

Retailers are apparently seeing little benefit from using these sites which is unsurprising as the notion of creating loyal customers for your business by offering discounts of up to 70% has always seemed a bit far-fetched to me anyway. These customers are clearly only there for one reason: a massive deal and it’s unsustainable for retailers to offer such large discounts on a regular basis when they are seeing little repeat business from customers who are just there to pick up a bargain.

Groupon invested heavily in sales teams to market to small businesses and in the end, this has proven to be an unsustainable way of scaling up. But at the end of the day, it comes down to whether the customers (i.e. merchants) found any long-term value in this method of promotion and it looks as though they are voting with their feet and not continuing to use this platform.