Wednesday, July 6, 2011

Now you see them all over ... Daily Deals (big discounts offered by local businesses for a short amount of time a la Groupon, Living Social, etc) ... And, admit it, you're tempted to "jump into the pool!"

Here are some facts:

Utpal Dholakia, an associate professor of management at Rice University, surveyed 324 businesses in 23 markets who had participated in daily deals with Groupon, LivingSocial, OpenTable, Travelzoo and BuyWithMe. He found that the good deals for consumers weren't always good deals for businesses.

A little more than half of the businesses Dholakia surveyed made money on the deals, while a little more than one-fourth said they lost money and the rest said they broke even.

That might not be so bad for retailers, if they thought they'd gain a new customer or make money in other ways. But the retailers said about 36% of users spent beyond the deal's value, and only about 20% of customers returned for a full-price purchase.

About half of the retailers said they'd run a deal again, while around 20% said they would not, according to the study. About 30% were unsure.

Another potential problem: Dholakia's survey found that more than 20% of the people who bought the deals never actually used them.