market_valuation_behaviour_cycle

Wisdom of the Crowd?

Jonny Darling Insight Leave a Comment

Discount deals & special offer coupon websites are experiencing a boom. What started as a niche collaboration service between cost-conscious specialist shoppers & consumer-hungry boutique retailers has since exploded into mainstream commercialism. The same purchasing power that big business can exert on suppliers is now turned on corporates of all sizes by their own customers, as they band together in a crowd to demand bulk discount. When there’s nowhere left to squeeze, it is the retailers that takes the hit. This scheme is pitched as a loss-leader, generating brand awareness and return customers in the medium-term, while absorbing major deficits now.

This marketing proposition is widely accepted to date, merchants queuing up to flog their wares below cost. The web model is simply. Develop a community network of buyers by offering unassailable discounts & take 50% of the advertised coupon price. Easy money! So it would seem. Every Tom, Dick & Harry is following in Groupon’s CityDeal wake; GrabOne, BoardsDeals, LivingSocial, FacebookDeals, the list goes on!

 

 

 

 

 

 

 

I describe it as a wake for good reason. It is a celebration of commercial suicide. Much has been written to support the view we are seeing an out-n-out ponzi scheme. I for one agree. In the long run (apart from being dead), both the sellers and buyers will suffer from this business model, while the intermediary will take the house.

That is not to say that crowd collaboration online can not be a mutually reinforcing and sustainable economic imperative, but the web should remove middle men rather than create snake-oil salesmen. It facilitates direct interaction and efficiency in communication. Surplus dead-weight ultimately will be squeezed out of the system, returning a chain of far fewer links forged together interdependently in a much more solid weld. A really good example of this is Eason’s Bookstore. They just launched EasonOffers.com. Easons realised the competitive dynamic in the market-place with Amazon’s web offering, e-books growing popularity and discount sites. In a very progressive and intelligent way, they have positioned themselves where they have most strength, in hard-copy supply, author/publisher relations and physical proximity to the consumer. Applying the daily deal ethos, Easons can actually trump the generic discount sites at their own game. Smart move in this particularly turbulent industry.

I look forward to seeing more innovation in bricks ‘n mortar businesses as they realise that the internet is not always the enemy, and that clever repositioning can open many more doors than traps. It will also expedite the demise of the free-loaders. Good riddance!