Deal/Offer Web Companies Brief Analysis

There is a strong growth rate and lots of new entrants in deal, offer business in the entire world. But there is also some serious weakness of this model that should be considered;

-One of the key reasons why this model works is that merchants have excess supply that they can sell for a discount, and this is due to some national and international global economic problems and it is unclear if merchants will continue to offer discounts in a better economic environment.

-Merchants cannot guarantee loyalty of the customers coming from these kinds of web sites since they are ultimately price sensitive

-Merchants risks to lose their regular customer base because of the discounted customers

But;

-Besides, these sites can customize and enhance their offers according to individuals that can attract more customers and merchants, since this one will not just resolve merchants’ sale problem but also it will help them to reach the right customers for their products and reduce the friction problem.

-Emerging Markets seems to be also appropriate for this kind of business, since economic fluctuations are frequent and consumption is growing. From merchant perspective, they don’t have all online sales forces and they have an open culture for bargains. From customers perspective, internet, social web and deal sites are now widely used and people are open to buy discounted products within a group of friends, like driving a Ferrari for a very limited time period.

Source for further readings : How Sustainable Is Groupon’s Business Model? Knowledge@Wharton (http://knowledge.wharton.upenn.edu/article.cfm?articleid=2784)