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The End of Groupon Glory Days

I've written about Groupon and similar services a few times in the past. I've generally been supportive of them, but my opinion is starting to change. I don't think these services are going to turn out to be outright failures, as some are predicting, but I do think that from the customers' perspective, the best days may be over.

(from wovox on Flickr)

The reason I say this is because I've noticed that the quality of daily deals has taken a dive lately. A lot of them are for "junk services" that I have absolutely no interest in. It also seems like there's been fewer deals for restaurants, and when there are, the deals themselves tend to be worth less. In the past, a lot of $25 for $50 worth of food deals were coming across the wire every morning. Now, $10 for $20 seems to be the more common denomination, and I'm beginning to understand why.

There's a lot of stories starting to surface like this one, which explains how Groupon used excitement and hype to exploit some businesses. The bottom line is that any business that tried Groupon once and got burned is probably never going to do it again. That means that all those "too good to be true" deals probably were, the businesses ate the loss, and customers won't see those sorts of deep discounts anymore.

But that's not the end of the story. Before, the answer to the question "why do businesses use Groupon" could be answered with a hypothetical: "because if it weren't a good deal for them, they wouldn't have done it." In fact, the truth may be exactly the opposite. Rocky Agrawal writes that running a Groupon is akin to taking out a really high interest loan, so a business might run one not because it's making them money, but because it's the only way to temporarily stave off their inevitable failure.

The Groupon model may very well to continue to work for businesses that sell services, like massage parlors and nail salons and yoga studios; but for businesses that sell goods, like retail stores and restaurants, I think the glory days are past.


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