[Editorial Notes: Groupon IPO has opened up realities of deal business and we believe that its important to bring perspective from the industry. This is a guest article by Sameer Shisodia (ex-writer at Pluggd.in) who now runs a hospitality business and also runs a site called dealrater.in. ]
While on the numbers front, one might see healthy growth in Groupon’s S1 filing, from the fundamental business model view it looks very very dicey.
I run a small business and have been approached by SnapDeal, Taggle and the likes. Somehow it never made any sense to me.
We’re attracting folks on a certain value proposition, and that is not based on discounting and “cheap”. On the contrary, its about a certain kind of experience and discounting as deep as these deal sites would like you to do would actually harm the brand! It tends to portray some sort of desperation, and calls into question the pricing vs value offered otherwise. We’ve also not had a very great experience with deal-hunters, and would rather stick to customers who value the whole experience instead. So we’ve completely avoided it.
I’m guessing this is true, as the second assessment above points out, for a lot of businesses. The deal sites are probably not batting at all for the merchants, and have a suck-them-dry approach. In the medium term, that won’t work well for consumers either (I’ve seen some restaurants create a ‘special offering’ for the deal, specifically, and am very very suspicious of what they’ll serve. I do not want my dinners and experiences ‘discounted’ along with the price.)
Let’s look at what a ‘good deal’ is. (I started http://dealrater.in as a follow up to this thought process a while ago).
Its something thats a very good Value-for-Money proposition. It doesn’t have to be cheap, or at a discount, for it to be so. Its usually goods or services of good to great quality (remember the low end Chinese bike manufacturers trying to dump cheap bikes in India ? Never took off.) And at a fair price that keeps the VFM high. Alternatively, it could be a low impact (don’t know or care much about quality…) and dirt cheap (…but at this price, who cares) offering.
What merchants need from deal sites is probably one of the following
- Announcement and price discovery (for a new business/products). Just want a lot of people to know about it. Don’t want to discount much – and in fact would like to discover price.
- Tryouts (for new businesses or offerings). The messaging is about “hey you like this category, so we thought we’d invite you to try this out”. Its almost like a select/invited/focus group the site needs to manage. Haven’t heard anything like this at all.
- Stock Clearance. Have a lot of stuff thats last season/end of line/want to get rid of. Straightforward. Let the consumers know transparently that this is the case. And very very clearly price below real street prices.
- Last Minute Inventory. Similar to Stock Clearance, but very different in how it’ll be done, who it targets etc. The need is to connect those who’re potentially looking for that inventory, or may hop on at the 11th hour if the price is right, and the unsold, perishable inventory. at Linger, we sometimes have this need.
None of the deal sites seem to be thinking in terms of what they’re solving, really. Everyone seems to be addressing the same set of lowest common denominators, and throwing a lot of money/sales effort at it.
There will be a shakeout and a deals-2.0 pretty soon!
What’s your take?
[Reproduced from Sameer’s blog. If you are running a deal site/or you are a SMB who has offered deals to these sites and want to share your insights/experience, do connect with us]
