This week Living Social has announced layoffs of roughly 9% of its workforce. Groupon has decided to keep Andrew Mason on as CEO after nearly removing him from the job last week. There’s a lot of chatter out there about whether this is the beginning of the end of the deal industry or whether it’s just growing pains the space is going through.
My good friend and colleague Boyan Josic got it right when, quoted by Upstart Business Journal, he made it clear that the big players took on a bunch of investor dollars in order to ramp up growth as quickly as possible in order to maximize investor returns. The problem with this strategy is that not everyone wins when the business does not focus on building and maintaining healthy relationships with the vendors who post deals on their sites.
When the vision of the business is the return on investment for hundreds of millions of dollars, a company glosses over its long term growth strategy which involves making sure it’s vendors are not only educated about how the deal industry functions, but also helping to prepare vendors to fully capitalize on their deal site offering; not just in terms of revenue today, but also in terms of acquiring long term customers.
The big players have completely failed in this regard.
And it’s my opinion that they are now paying the price in terms of this recent ‘correction’ in their business structures in order to achieve greater efficiency.
Now what’s interesting, and this is something we at Daily Deal Builder have been saying for a few years now, is that a handful of retailers have taken the deal industry into their own hands, and also local and niche specific deal sites are not only still expanding but also still coming online. The retailers and the local and niche specific deal sites are continuing to take market share from the big deal site players and we don’t see this stopping any time soon.
