02 Oct

NYTimes.com – Deal Sites Have Fading Allure for Merchants

Just a few months ago, daily deal coupons were the new big thing. The biggest dealmaker, Groupon, was preparing to go public at a valuation as high as $30 billion, which would have been a record amount for a start-up less than three years old. Hundreds of copycat coupon sites sprung up in Groupon’s wake, including DoubleTakeDeals, YourBestDeals, DealFind, DoodleDeals, DealOn, DealSwarm and GoDailyDeals. Deal sites were widely praised as a replacement for local advertising.

Now coupon fatigue is setting in. Groupon’s public offering has repeatedly been put off amid stock market turmoil and internal missteps; the company says it is back on track, but some analysts say it may never happen. Dozens of copycats are closing, reformulating or merging, including Local Twist in San Diego, RelishNYC and Crowd Cut in Atlanta. Facebook and Yelp, two powerhouse Internet firms that had big plans for deals, quickly backed off.

Even the biggest Web retailer, Amazon.com, has had trouble gaining traction in oversaturated New York, where it started offering deals with great fanfare a month ago. There are at least 40 active coupon sites for the city, according to LocalDealSites.com.

Shopping coupons have a long history, and they will undoubtedly continue to play a significant role in local merchants’ efforts to attract customers. But what has become apparent is a basic contradiction at the heart of the daily deals industry on the Internet.

The consumers were being told: You will never pay full price again. The merchants were hearing: You are going to get new customers who will stick around and pay full price. Disappointment was inevitable.

Some entrepreneurs are questioning the entire premise of the industry. Jasper Malcolmson, co-founder of the deal site Bloomspot, compares the basic deal offer with lenders’ marketing subprime loans during the housing boom.

via NYTimes.com – Deal Sites Have Fading Allure for Merchants. Oh yeah, right now is starting to look like a bad deal.