Sunday, October 02, 2011

DealChicken | For merchants, the 'fading allure'

Excerpts from a Page One New York Times story this morning:

What has become apparent is a basic contradiction at the heart of the daily deals industry.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.

By the time industry leader Groupon issued its financial documents in June, the first step to going public, the phenomenon seemed a little less promising. Contrary to what the company had maintained, it was not profitable in the traditional sense. Eighty percent of subscribers to Groupon’s daily e-mails never bought a deal.

The long-term reputation of participating merchants may be at risk, according to a new study by researchers at Boston University and Harvard that analyzed thousands of Groupon and Living Social deals. The researchers found that fans of daily deals were on average hard to please. After they ate at the restaurant or visited the spa, they went on Yelp and grumbled about it. This pulled down the average Yelp rating by as much as half a point.

How crowded is the market?
Local Deal Sites lists 167 sites across the nation -- but not Gannett's DealChicken, which is now targeting more than 50 markets by year's end. Those include Phoenix, where DealChicken first launched in September 2010.

Number of sites in a sample of GCI markets, according to Local Deal:
  • Appleton, Wisc.: one
  • Des Moines: five
  • Montgomery, Ala.: two
  • Lansing, Mich.: two 
  • Louisville, Ky.: 12 
  • Phoenix: 25 
  • Reno, Nev.: three 
  • St. Cloud, Minn.: one
  • Tallahassee, Fla.: five 
  • Westchester, N.Y.: three


  1. Wow. 25 daily deal sites in Phoenix. I'm one of the consumers in the NYT piece. I get daily deal emails from Groupon, DealChicken and whatever Amazon's daily deal merchant is. I've never bought one. Most of them are crap I don't care about but more importantly the deals are so bad for the merchant that I can't, in good conscience, use them.

    I think the daily deal pressure in places like St Cloud and Westchester are greater than your list may indicate. St Cloud may have only one, but St Cloud is so close to the Twin Cities that residents could easily get Twin Cities ones. The same with Westchester and NYC.

  2. Living Social is building a huge campus in the DC area. It ain't dead yet

  3. The Chick was supposed to launch in Shreveport Sept. 27 but hasn't. Wonder if there's a lack of deals? Four or five daily deal marketers in the region, including Groupon, which has a strong presence.

  4. Which will come first?
    The Deal Chicken or the egg it lays?


Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."

Note: Only a member of this blog may post a comment.