How Sustainable A Buy Is a Daily Deal?

As group buying, flash sales, and daily deals continue to swarm the internet faster than you can say "Groupon IPO," much of the hype around these types of services has come under closer examination. "It's just a coupon with a fancy distribution model," "It's good for the end-user but not for the businesses," and "Why pay full price for a massage when I can wait for a Groupon?" are some of the murmurings that have made their way across the blogosphere in critique of the daily deal phenomenon. So if some businesses lack incentive to provide deals, which ones should we be hoarding as quickly as possible and which ones are here to stay? And if we can all agree that most daily deals are a steal, who exactly is getting robbed?

Daily deals sites are popping up everywhere, in many cases becoming but an added feature rather than a stand-alone business. Magazines, social networks, shopping and travels sites have now jumped on the bandwagon in the hopes of reinvigorating their revenue streams and customer base. But - as a consumer - keeping track of every deal offered to us is still about as appealing and time-consuming as clipping individual coupons out of the back of a grocery store catalog. And the lack of network effects associated with the industry means we likely have more fragmentation on the way. Perhaps the next big thing in deal doling out will come from deal aggregators such as Dealery and Yipit, who group all the deal madness together into one easy-to-read email. But what about the real customers behind group buying and deals - the businesses?

TechCrunch's multi-wave assault on the integrity of the Groupon business model has provided some insight into the types of businesses that benefit from a deal offering and those that don't.  Gyms, hotels, yoga studios, and classes of all sorts with more capacity than customers to fill it are perfect examples of the types of businesses with the marginal costs to carry a good deal. Deals on restaurants and other businesses with higher marginal costs, on the other hand, make less sense. And while the quick cash injections promised by a group deal are beneficial to some businesses in the short run, imprecise customer retention figures and long-term branding implications may lead many businesses away from the urge to cash in for a deal. After all, companies have been giving deals and conducting sample sales for years, but the newer, more public distribution model attacks brand value in a way a discreet coupon or a basement sample sale in Chinatown never did.

 So, are daily deals here to stay? Sure. But probably in the same way coupons, sales, and reduced prices have always been. And just as these options made more sense for some businesses, their digital deal counterparts will likely evolve towards more high margin businesses. For is an eternity of discounts on our favorite brands and popular restaurants possible without driving up prices or driving down brand value? Only time and more discounted manicures will tell...