Is Groupon a killer app or a serial killer in the travel industry?
“This unsub is young but well organized. He has all the trappings of success but is in fact hemorrhaging money trying desperately to maintain an air of normalcy and control.
“He is profit-motivated, using charm to convince his victims to give away their goods at a fraction of their true value and when he is done collecting his cut, he leaves them to pick up the pieces.
“He lacks empathy and targets victims that are highly trusting, some might say naive. They go along with the unsub’s plan because they feel they have too, not knowing that they are walking into a trap.”
I know it sounds like an episode of Criminal Minds, but in fact it’s a profile of a different kind of killer – a killer app.
What’s the difference between this killer app and a serial killer? Well, in this case the unsub is a media darling about to IPO and the victims are small businesses left to dig themselves out of a proverbial shallow grave.
In fact, author Joel Bakan in his book The Corporation: The Pathological Pursuit of Power describes it as follows:
“The operational principles of the corporation give it a highly anti-social ‘personality’: it is self-interested, inherently amoral, callous and deceitful; it breaches social and legal standards to get its way; it does not suffer from guilt, yet it can mimic the human qualities of empathy, caring and altruism.”
Now, I’m not known to rant and generally speaking I try to focus on the positive but sometimes “something” comes along that makes my skin crawl and the hair on the back of my neck stand up.
In 1999-2001 it was businesses going public with no business model,s spending obscene amounts of money on Super Bowl commercials and taking average investors for a very expensive ride. These days, that “something” is the daily deals craze.
I can’t seem to get through a single day without being bombarded with talk of Groupon this or LivingSocial that.
With Groupon’s S1 filing and imminent IPO, some much needed light has been pointed at the daily deals business model and, now, finally, people are starting to look under the covers and ask questions.
In January 2011, I wrote an article titled Does the Groupon model lead tourism businesses racing to the bottom? in which I discussed the importance of analyzing daily deal promotions.
It proved to be one of my most popular posts and generated a lot of discussion around the daily deal model as it applies to travel.
I’m not going to go back and rehash any of the things I talk about in my previous article. If you like, just read it later.
In fact, I’m going to go a step further and say that if you run a daily deal for a small tourism business, I think you are potentially making a bad business decision.
I’ll go even further and say, if you’re a large travel business and you’re planning on partnering with such a company to make a quick buck in the daily deals space, then shame on you. Would you knowingly go to bed with a psychopath?
I fully appreciate the fact that Groupon has made a boat load of money for its founders and investors and that it has provided a bunch of deal-seekers with some great savings on stuff they either would have already purchased or would not normally have purchased.
It has also helped fuel a daily deals industry that is growing at a ridiculous pace. You only need to blink and “POOF!” a new deal site is launched.
All of these sites, however, are fishing for the same fish, the small business, and increasingly small tour and activity business are on the sonar.
With this daily deals love fest, everyone seems to focus on two things, the daily deal company (in this case Groupon and its IPO) and the consumer (and about how much they are saving by using daily deals).
What most people seem to forget is the small business in the middle that is fueling this “hot” segment.
The problem is that deal site “inventory” is delivered by small businesses that are most at risk of failing if they make a bad business decision.
In this excellent series on TechCrunch, Rocky Agrawal explains why daily deals are bad for business. Rocky explains (as I have before) that small businesses tend not be marketing experts or business analysts and, as a result, they are susceptible to hype and pressure sales tactics.
As a result of the daily deal craze, small businesses eager to hop on the daily deal bus are instead getting hit head on with the reality of delivering on an unsustainable discount and are littering the sides of the “super-highway” like so much other roadkill.
Some of you are probably asking “So what? Some Joe Shmoe doesn’t do his homework, runs a bad deal, and goes out of business. Big deal.” Well, it is a big deal. It’s a very big deal for Joe – and that’s my main point.
This trend isn’t just about money and how much Groupon’s stock is going to rise.
A bunch of already rich people are going to make a stink load of money when Groupon hits the public markets – that’s a given.
But it’s not about them, it’s about all the Joes and Janes out there trying to make a success on their own terms. It’s about understanding and appreciating the role that small businesses play in our local economies and about how important they are to the health and vitality of communities.
It’s also about how small businesses can make or break the tourism experience for a visitor. It’s about treating small business as a renewable resource rather than one to be exploited.
Fundamentally, this trend is about empathy and the lack thereof for the people most affected by daily deal failures. Believe me when I tell you that no small business is going to get rich running daily deals. Most are lucky to break-even.
Small tourism businesses have a hard enough time making ends meet. It’s easy to say they don’t matter and that “Oh well, so sad, another one bit the dust”, but at the end of the day, it does matter and it matters a lot.
So, that said, instead of eroding the value and offerings that these small business people struggle to deliver, why don’t we find ways to empower them to deliver superior products and services to a market that is actually interested in the experience and not the deal?
Let’s wave a joyous goodbye to the deep discounted daily deal trend and usher in a new future, one that treats small business with respect, nurtures them to succeed, and focuses on mutual benefit. Let’s focus on delivering value to travelers rather than pandering to the notion that cheaper is better.
That future sure looks a lot better to me than standing around a shallow grave site surrounded by police tape thinking about how I’m going to explain to a family that their small business just fell victim to a serial killer app.
Stephen Joyce is a contributing Node to Tnooz and has been working as a travel and tourism technology consultant since 1995. Stephen is the CEO of Rezgo.com, a cloud based software as a service reservation and booking platform for tour and activity providers.
Stephen is the Board Chair of the OpenTravel Alliance.
Stephen is a graduate of Capilano University, is a certified commercial pilot, and holds a certificate in IT Management. His personal blog is the Travel & Tourism Technology Trends.