PhotoA tough economy and an increasingly mobile, interconnected consumer universe has made daily deal websites like Groupon a hot commodity. Consumers like them and so do businesses.

But they may not be such a good deal for either consumers or businesses. For consumers,they may lead to more impulse buys.

"I would advise users to use discretion," said Esther Swilley, assistant professor of marketing at Kansas State University. "Make sure it's something you really need or want, and you're not just purchasing it because it's there and time is counting down."

Hard-to-move merchandise

Daily deal websites and flash sale websites often offer prices well below what would be seen in a retail store or through typical online shopping. Often its just a way for a store to dispose of merchandise no one wants. If you slap a discount on it with a quick expiration, it can create a sense of excitement, Swilley says.

Whether daily deals are really such great deals may be open to question, but consumers are still in love with the concept, according to a ConsumerAffairs computerized sentiment analysis of more than 1.9 million postings about Groupon on social media over the last year.

 

Businesses, on the other hand, are sometimes finding that participation on these discount programs doesn't bring them the desired results. Businesses offer a service or product at a discount in order to bring in new customers, with hopes that they will enjoy what they purchased and return for more.

"What's happening, though, is that people aren't coming back after that initial coupon use," she said. "They think, 'this was cheap the first time, I want it to be cheap again.' They're not really gaining a true customer but simply a one-time user who is deal-prone. Now retailers are reconsidering the value of web coupons."

The ConsumerAffairs analysis found little change in net sentiment for Groupon over the last year.

 

Flash sales

Daily deal sites are an updated version of newspaper coupons. Flash sale sites take it a step farther, taking advantage of the fact that people out shopping can access the web through their smartphones for an item that may be only on sale for a few hours.

MyHabit, one of the more upscale flash sale sites, though much smaller than Groupon, commands amazing loyalty from its members, with a net positive sentiment approaching 100% in a ConsumerAffairs analysis of about 12,000 consumer postings.

 

"Flash sale websites are often used as a marketing tool," Swilley said. "If a company has a new product coming out, they may want to see how the public feels about it. They use a flash sale to lower the price a bit so that a few people will buy it and get it out there. Then, when someone asks where you bought your shoes, they can go to the store and purchase them."

Flash sale websites, such as Gilt, often operate through email. Potential customers sign up to receive a list of daily deals, or visit the business's website, with the promise to receive a large discount if they purchase a product within a short period of time.

MyHabit and Google Offers

Well-known companies are now getting into the game. Amazon offers the high-end flash sale site MyHabit and Google created Google Offers, a daily deal site.

Consumers have been eager to take advantage of what may be perceived as a quick bargain -- these websites have created a billion-dollar industry. But Swilley warns would-be buyers to take a second look at what they're considering.

"You may see a pair of shoes that is marked down to $500 from $1,600," she said. "Yes, it's a discount, but would you have seriously considered an expensive pair of shoes if the picture wasn't in front of you?"

Purchasing an item from a time-limited website is only advisable if you search out the deal, not if the deal comes to you, Swilley said. She suggests using these websites to make travel plans or purchase high-end items -- but only if you were looking for them in the first place.

Swilley's advice is no doubt right on target, but MyHabit users seem to have no regrets about their purchases, as shown in this chart:

 

 


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