Groupon is hurting the Daily Deals Industry!

We do not write much about Groupon. This is an exception.

It is clear to us that both the actions taken by Groupon over the past year and the industry’s reactions to Groupon are hurting the overall industry. Hurting the consumer’s comfort in buying from deal sites, certainly hurting the merchant’s view of the benefit of leverage deal campaigns, hurting the media’s view of the space, hurting the views of customer advocate groups, and truly hurting the views of investors looking at the Local Commerce space.

Case in point:
Sure Groupon is unprofitable. So what. It took Amazon 6 years to reach profitability in an industry that everyone hated. (online selling and warehousing). Groupon’s lack of profitability is not the point. It is the following:

  • Restating earnings
  • Poor customer ratings
  • Merchant discontent
  • Arrogant or immature behavior from certain corporate executives
  • Constant media attacks and bad press
  • Greediness
  • Bloggers love to hate Groupon
  • Stock losing over 50% of its value since IPO

All of these add up to a market that dislikes Groupon and what they stand for. If I were to advise them, I’d have them hire top notch PR firms to help improve their image, because right now, it really sucks….and that image and reputation is hurting the rest of the industry, even in Canada.

Although Groupon commands over 55% of the market in the USA, here in Canada it is only about 23%. Nevertheless, media, consumers, merchants and the market in general in Canada typically react to Groupon news as if it were gospel for the industry. Since this news has been primarily negative over the past 6 months, well, the market has taken a beating in terms of reputation. Which is a shame because there are fantastic stories and examples across Canada of Deal companies doing interesting and exciting things. There’s Tuango in Montreal continuing to dominate the industry, there’s Teambuy who has very successfully transitioned to an online destination of products and local offers, they are steadily becoming an online ecommerce shopping destination. There, is Gosango (formerly Twongo) in BC that is executing brilliantly across the smaller towns out west, there’s Wagjag that launched the country’s only Grocery deals service, and they recently launched a Golf Niche. There are other examples of deals sites continuing to benefit consumers and merchants across the country. However, their accomplishments are all being overshadowed by the industry’s inability to let go and look past Groupon’s missteps.

On our side we see this negative attention hurting sales of deal sites, hurting their ability to attract and retain quality merchants and hurting the interest of investors, VCs and others into investing in this space. We have actually seen some Daily Deal acquisitions not going through because of all this negative attention.


So what can be done?

It is far time for us in Canada to take control of our industry. As opposed to letting media and what goes on in the US dictate how the market responds here. As such we will be implementing some industry wide projects that take aim at improving the reputation of the Deals industry in Canada and also help communicate the benefits of this industry far better than it presently has. Here are just some of the projects being worked on together with Deal sites across the country: Of course in both English and French.

  • Daily Deal Code of Conduct for Canadian Deal providers
  • Content showcasing successful campaigns and how merchants have leveraged deal promotions
  • Pitfalls for merchants to avoid
  • Better communication with the industry on the positive aspects of the Deals business in Canada
  • More Data and analytics for Canada
  • Various events specific for this industry and specific for Canada

There are far more initiatives in the planning process. These are but some. The purpose is to communicate with the industry (consumers, merchants, investors, suppliers, media) in a coordinated fashion, with one voice as opposed to every one of the 150 or deal sites across Canada trying to do their own thing. Separately, none of the deal sites have much power in Canada. Collectively, however, many initiatives can take place. We plan on being a big part of such initiatives and look forward to working with deal providers across the country in a coordinated effort at controlling and growing our industry, rather than being victims to it.

More to come, stay tuned.

  1. I believe that a lot of the bad press about Groupon and the daily deal industry in general stems from the media sources that are reporting on the subject. Think about it. Companies who own advertising mediums such as television, radio, and print are not going to come out and say that the daily deal industry is great because it is a competing marketing medium. These media companies make revenue from their advertising dollars so of course they are not going to position our industry as a revolutionary form of marketing. That would be like a billboard advertising company coming out and saying that Google Adwords is the best form of advertising ever. Don’t expect to see that change anytime soon.

    However, as much as other media outlets are to blame, a lot of the blame for how our industry is viewed comes from how we (daily deal companies, industry service providers, etc.) are currently positioning it. I find it ironic how daily deal companies are giving marketing advice to business owners and yet we are not marketing our own industry correctly. Since Groupon is the leader in the daily deal industry, media sources closely follow this company and often forget about all the other great daily deal sites. Since the name “Groupon” sounds a lot like “coupon,” it immediately makes everyone think about penny-pinching customers who are really cheap. The word “coupon” has a very negative connotation and that definitely does not help our industry.

    Instead, what if we all focused on why this industry is revolutionary? We collectively need to position our industry as “advertising 2.0″ to the media, merchants, and consumers alike.

    So how do we do this? It all starts with how the industry is positioned to consumers by the daily deal companies. Collectively, we have already attracted a ton of users by pushing the “save 50-90% off the best of your city” approach. Make no mistake; I am not proposing that we completely abandon this strategy. However, I do believe we need to supplement this approach with the real reason why this industry is so great. Instead of a business spending a lot of money upfront on tradional “pay and pray” advertising which really adds no benefit to the consumer, our industry actually accomplishes the goal of getting mass exposure for a brand AND it benefits the consumer. It’s better for all parties involved!

    For example, what if daily deal sites focused more on the fact that the businesses they are featuring are cool because they are not wasting money by putting up a bunch of billboards. Instead, because this company believes that you will be hooked if you actually try their products or services, they would rather save the money from putting up billboards and pass the savings on to customers who will actually try their business. It would even be cool for a daily deal company to run a contest asking its users to send in pictures of businesses that spent a lot of money on a fancy billboard that could have passed along savings to their customers with a daily deal promotion. It’s just an idea to start to make consumers think differently when they see traditional advertising.

    I have been involved with the daily deal industry since there were only 5 companies in Canada and I have seen the evolution of the industry from the beginning. I honestly believe that, collectively, we need to work on how we (daily deal companies, industry service providers, etc.) are positioning this industry. Media outlets are not going to praise our industry because they are worried about keeping their current advertising revenue so don’t expect that to change anytime soon. Instead, we need to start positioning our industry to consumers and merchants as advertising 2.0 versus just an online site for coupons.


      Good points Kyle…very good points.