Are Groupon-Style Group Buying Services Beneficial for Retailers in the Long Term?

Deals like those offered by Groupon are increasingly popular among consumers, but what about their long-term impact on retailers? Some retailers might just see the deals as a quick fix to boost sales in the short term, but do they really bring in more customers in the long run?

Short-Term Gains vs. Long-Term Losses

As a consumer, the short-term gains of a Groupon deal are tempting. I've never returned to a merchant after the deal has expired, and the reason is simple: once the deal is over, the product’s price is no longer attractive. Customers like me often feel embarrassed about paying full price for something that they already bought at a discount. As a result, the real goal of seeking deals is to find the best possible price, and I suspect that most consumers behave similarly without any tangible data to support it.

However, things don't always go smoothly on the merchant’s side of the deal. The deal often involves higher customer expectations, as the retailers or brands know that the likelihood of repeat business is slim. On my end, I often find it frustrating to deal with merchants who have offered a deal and then offer poor post-deal service. They anticipate that customers won’t return, and it's often true. Given that most deals involve procuring goods at a reduced cost to offload them, it can be a turnoff for consumers who are used to waiting for better deals.

The Decline of Strategic Branding and Relationship-Centric Marketing

Brands historically saw long-term customer engagement as crucial for building a robust brand image and fostering valuable relationships with consumers. However, the concept of regular price drops and end-of-season clearance sales made it easier for consumers to wait for better deals, leading to increased competition in the retail market. This shift caught many brands off guard, especially those who heavily relied on regular full-price sales.

Moreover, the influx of off-price retail options like Burlington Coat Factory and Century 21, along with online marketplaces, further exacerbated the issue. Consumers had access to a wide range of options for buying goods at reduced prices, reducing the likelihood of return visits to the same brands. This trend was further fueled by the rise of websites promoting off-season and discounted goods, leading to increased price competition and reduced brand loyalty.

The Introduction of Groupon: A Final Dead-End?

Enter Groupon, and other group buying services. These services were initially seen as a way for retailers to attract new customers, but the reality is more bleak. Deals such as a 50% off good on Black Friday can be a massive sales opportunity, but the long-term value becomes questionable. For example, the Gap deal on Groupon saw a surge in sales but, in the long run, who is going to pay full price for the same goods? The reality is that such discounts often demotivate customers from returning to the original retailer for full-price items.

The engagement and educational value of a Groupon-style deal is minimal. While customers might visit during the promotion period, the real intention is to strike while the iron is hot. Post-deal, the retailer often sees a drop in repeat business as the initial excitement fades. It’s a high-risk strategy that rewards short-term sales at the cost of long-term customer relationships.

Conclusion

In conclusion, while Groupon and other similar services can inject a short-term boost in sales, the long-term impact on brands and retailers is questionable. The focus should be on building strong, long-term relationships with customers through consistent quality, excellent service, and genuine brand engagement. By focusing on creating value beyond short-term deals, retailers can foster loyalty and positive brand images, leading to sustained growth and profitability.

*Keywords: Groupon, group buying services, long-term customer engagement*