Daily Deals mania wearing thin in US

Last Updated: Wed, Dec 05, 2012 07:30 hrs

Washington, Dec 5 (IANS/RIA Novosti) Having overwhelmed a lot of people in the US three years ago, Daily Deals, a concept of getting services at highly discounted prices, today appears to be losing its charm.

Massages for half price. Cooking classes with top chefs. Deals to test drive sports cars on superfast racetracks, or spend the day with the Dallas Cowboys cheerleaders, including locker room access. All of these were part of daily-deal mania.

In 2009, daily-deal mania swept across the US, as price-obsessed Americans were introduced to an innovative, social media-driven concept of saving money on common and not so common services with the advent of flash sale websites.

The concept was simple, find deals around town that offer deep discounts on dinner, yoga, or other products. In return, business owners received exposure and an increase in customers.

"There was such a craze about these daily deals, and everyone was excited," said David Reibstein, marketing professor at The University of Pennsylvania.

During that period, industry leaders Groupon and its chief competitor LivingSocial were called game-changers.

Consumers couldn't say no, thousands of people found jobs at the companies, and hundreds of other websites launched as budding entrepreneurs sought to emulate their success. Three years later, however, the once-booming industry is near shambles.

Last week, LivingSocial laid off 400 employees, 10 percent of its entire staff.

Groupon, the company that once turned down a $6 billion buyout offer from Google, is also taking a beating. In early November, its stock plummeted 30 percent.

Over the past three years, analysts say, online deals have gone from a hot commodity to an easy to copy but difficult to sustain business model.

A recent survey found only three percent of retailers reported repeat customers from daily deals promotions.

"The customers that use the deals are not high value customers," said Ken Russell, an analyst who works in business development for tech startups.

The survey also found 82 percent of small business owners polled said they would not run a daily deal this year, even though they had in the past.

Saying consumers were beginning to shy away from daily deals as well, Russell likened the plight of the daily deal industry today to the tech bubble that later burst in the early 2000.

Using data gathered by daily deal aggregator Yipit, the Wall Street Journal reported that 170 of 530 national daily deal websites disappeared in 2011.

--IANS/RIA Novosti


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