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Group buying websites, popularized in large part by Groupon and LivingSocial, is one of the hottest markets on the consumer internet right now. As a result, established businesses and entrepreneurs have flooded the space, hoping to capture a little piece of the action.
Despite the fact that online group buying is now generating billions of dollars per year in sales globally, some believe that market is overhyped and, more importantly, unsustainable.
Skeptics commonly cite to the fact that group buying websites often do far more for consumers than they do for the businesses which have flocked to them. At some point, they argue, merchants will realize that they're getting the short end of the stick, and eventually inventory of deals will dry up.
There's also the problem of commoditization. Group buying deals are everywhere these days, and the number of online properties through which they're being offered is still growing rapidly.
The latest evidence of that: Mercury Radio Arts, the media company owned by radio and television personality Glenn Beck, has launched Markdown.com. As the name suggests, it's a group buying site with a slight Glenn Beck twist. According to a statement issued by Beck:
Markdown is a place where I will be able to connect you directly with the products and retailers that I love. From the best ice cream in America that you’ve never heard of, to a great summer beach read, to exclusive discounts at the name brand retailers you already know by heart-Markdown will offer all of that and more. But, best of all, Markdown is a place where my personal slogan-value and values-will be brought to life.
Beyond the 'values' marketing spiel, Markdown.com is pretty much indistinguishable from the dozens upon dozens of other group buying websites that are trying to bask in Groupon's glory. This, of course, doesn't mean that it won't be a profitable endeavor; thanks to the audience Beck commands, it probably will.
But therein lies the problem with the market: if every individual or company with an audience jumps on the group buying bandwagon, the commoditization of the group buying model will only accelerate. Already, we've seen newspapers and popular blogs entering the space, but the market may be close to a tipping point.
For consumers, there's a 'daily deal' at every turn. Will fatigue soon set in? Which kinds of deals will consumers continue to go for, and which will see increasingly diminished returns? For merchants, the number of providers offering to run deals is exploding, and in most instances, there's little differentiation between them. How do you choose?
As I wrote nearly a year ago:
...publishers will inevitably face a catch-22: although these models are wildly popular right now, growing competition and commoditization will increasingly strain their sustainability.
There's also the risk that competition and commoditization will kill the goose that laid the golden egg. If every publisher is hawking 50% off deals on a daily basis, the deals lose their value, and the urgency that drives sales today will probably be reduced. After all, if you can always find similar deals, chances are you'll eventually become 'numb' to them since you know you can always find them.
Love him or hate him, he has proven himself to be a shrewd media businessman. But when somebody like Beck starts hawking daily deals, it should send a powerful warning to others that the group buying market's best days may be behind it.