Groupon, Living Social, And Daily Deal Sites Are Doing More Harm Than Good With UK Investigation

Though the daily-deals industry generated almost $3 billion in 2011, the attrition of both providers and merchants is justifiably amplifying questions about its sustainability –as well as who's at fault for deals gone wrong. – Dan Slater, Fast Company Magazine

In an excellent piece in Fast Company Magazine, writer Dan Slater raises a critical question about deal fatigue. When sites like Groupon and LivingSocial firstlaunched, we couldn’t subscribe fast enough to each deal site’s mailing list. But, are deal sites actually doing more harm than good to consumers?

The prevailing wisdom is that daily deals are good for consumers, yet potentially bad for businesses (at least, those without a clear follow up or upsell plan in place). Yet it’s fair to say that the buying experience hasn’t always been rosy – to the point that the UK’s Office of Fair Trading recently launched an investigation of Groupon and found breaches in the company’s pricing, advertising, and product claims. Extensive media coverage has also looked at general merchant dissatisfaction with deal sites.

The deal site landscape has become more complex, with the onslaught of niche specific providers. AppSumo offers deals on software products geared toward programmers and web entrepreneurs. You can find the latest in green-friendly kid products at EcoBabyBuys and daily wine deals at The Wine Spies.  For any product you can think of, there’s a deal site that’s hawking it. But not all catch on. About one third of these sites have folded in the last year, leaving questions about whether dead deal sites’ purchases are even still honored.

From a consumer perspective, another problem is simply deal overwhelm. In a single day, you can get a dozen emails peddling spa visits, pet products, local getaways, and five different restaurants. What was once an invited guest in your inbox has now descended into the din of generic advertisement. It’s hard to sort through all the options, so many of the emails just get deleted without being opened. Eventually people just start wholesale unsubscribing campaigns.

Many merchants have complained that they lose money on deals, can’t handle the onslaught of business, and often don’t see daily deal customers converting into long-term buyers. These problems can translate into a stigma that merchants now have against deal buyers. When you show up for that spa appointment booked on a deal or present your coupon at a restaurant, it’s quite possible that you’ll be faced with disdain. And even if there isn’t an active prejudice against deal customers, there’s often confusion about what the deal covered and how it can redeemed. So the product or service might be cheaper, but the experience offset by poor customer service.

Finally, there’s the question about how good a deal that deal really is. The UK investigation raises important questions about pricing practices and deal ethics. This isn’t the first time these claims have been made. But if it’s true even some of the time that the value of deals is overstated, the potential monetary benefits of these sites quickly erode.

So where does that leave us? Some serious questions have been raised in recent weeks about the real benefits and even the sustainability of the deal industry. I doubt big players like Groupon or LivingSocial are going anywhere soon. But before you make that next purchase, make sure that it really is a savings and that you’re not making important trade-offs in terms of customer service or experience.