Diggin' technology every day

May 8, 2011

Social Shopping – weapon against small businesses

Filed under: General — Tags: , — Nate @ 10:46 am

I’m not sure if Social Shopping is the right term or not, but what I am referring to is the Groupons of the world as well as those cell phone apps that help you hunt down specific deals at retailers.

I have been thinking about this off and on for quite a while, and it really is a troubling trend for me, what sparked my interest today was this article I saw on slashdot.

My concept around Groupon is kind of interesting in that you get a group of people a discount or special offer of sorts at your business. The businesses offering the discounts expect, in return to get repeat business from many of those consumers. However it seems in reality that is rarely what happens. The business becomes a victim of their own deal, and most of those consumers never return (unless they get another screamin’ deal). So the business takes a big hit on the front end, and gets little or nothing in return.

Then there are the businesses that offer something that they cannot hope to possibly fulfill, such as the article about the photographer article above. I saw another news story last year where about a dance studio having similar issues, as well as a house cleaning service. This problem is probably addressable by better educating the business that is posting the offer to the site(s).

The other really troubling shopping trend are those cell phone apps that allow you to do stuff like scan the barcode of the item you want to buy and it will look at other shops in the area to try to find a better price.

On the surface it sounds like something good for the consumer, but in the longer term I believe strongly it will cause significant harm to the small businesses who can afford only so much to offer as loss leaders to bring people into their stores. Again there is some expectation that there will be return business, and I believe in this situation the likelihood of that happening is higher than that of Groupon but not nearly enough to make up for the losses incurred by the good deal they were offering.

I’m not sure what will happen with the group coupon sites, whether it is something like small businesses realize what is happening and stop participating in the sites altogether, or maybe they feel so much pressure from everyone else that they feel compelled to participate for some mutually assured destruction. Or maybe something entirely different.

As for the cell phone apps, it’ll be a lot harder to deal with those, it could be that businesses are forced to stop doing loss leaders, or try to impose rules around taking pictures in the store(hard to enforce), I’m not sure.

It seems like a scary time to be a small business in this economy, with everything that is going on in the macro economy, having technology exploit your business even more is quite sad.

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