Deal Burnout: Too Many Discounts?
NEW YORK (MainStreet) -- When the hugely popular deal site Groupon announced it would go public earlier this year, many skeptics questioned whether high operating costs and the company's sometimes tenuous relationship with retailers would make the site's success short-lived.
The more fundamental threat to Groupon's business model and that of many other deal sites like it, however, may be something that once seemed unthinkable: Consumers could simply grow tired of all the bargains.
|Having become a dime a dozen, half-off bargains may no longer be a real find.|
After the recession hit in late 2007, dozens of daily deal sites launched, offering big discounts to the many consumers eagerly searching for ways to pinch pennies but still enjoy themselves. Suddenly, shoppers no longer had to rummage through multiple store circulars to find the right deal. Instead, these websites tailored offers to each shopper's interests and location and delivered these deals directly to their email inbox each morning.While this formula has proved enticing enough for millions of subscribers to sign up for deal sites such as Groupon and LivingSocial in the years since, several shopping experts speculate that these consumers will begin to experience a kind of deal burnout, if they haven't already. "There is definitely a risk of oversaturation with these daily deal programs," says Kit Yarrow, a professor of psychology and marketing at Golden Gate University who specializes in consumer psychology research. "Consumers can develop an increasing tolerance to that sense of the thrill of a bargain, and eventually it just stops being thrilling." As Yarrow points out, many of the consumers she's spoken with get eight to 10 deal-related emails per day. These consumers watch as their inboxes are flooded with flight promotions from Travelzoo, restaurant deals from Yelp, flash sales on clothing from Gilt Groupe and the infinite number of half-off teeth whitening offers that seem to be pushed out from all deal sites simultaneously. Each of these deals is billed as a "significant discount" available for a "limited time only," buzzwords that are often used by marketers to compel the consumer to make an impulse buy. Yet, it becomes increasingly difficult to convince consumers they need to make a purchase right then and there when they are offered countless limited-time bargains day after day, many of which resemble one another.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV