Think getting into bed with a daily deal site is always a big WIN–WIN? Think again. It’s obvious that the media loves subscriber deal sites right now. We’re constantly seeing positive coverage about GROUPON IPO or the fact that livingsocial is raising $200M. The truth is that not every business that hooks up with this company is going to benefit. In fact, many lose and lose BIG. That’s not because these GROUPON sites are trying to scam you or anything like that, it’s just because merchants are suffering from massively overinflated expectations, even a sense that there is little or no risk to these deals. Part of this is created by the positive Media Attention and part of this is the sense that this GROUPON offers are something new and magical. They’re not. Just like within the other promotion or discount offer, merchants need to beware. According to consultant Rocky Agrawal, the typical deal site breakdown looks like this: customer pay 50% off the regular price, the deal company gets 50% of the discounted price, and the merchant keeps remaining 50% of the discounted price. Not too many merchants can sustain a 75% discount for long. Their rationale is that even though you won’t make money on the offer, you’ll acquire a bunch more customers and your business will flourish. http://www.youtube.com/watch?v=SfpUTZk8VsY
