USA Today: Daily coupon deals may not work for buyers, sellers

By Jayne O'Donnell and Hadley Malcolm

WASHINGTON – On a typical Friday night, the bar at Brasserie Beck here is packed with people waiting for a drink — perhaps one of the 90 Belgian beers it sells — and often a table in the bustling dining room.

It's been this way almost since renowned chef and owner Robert Wiedmaier opened the restaurant in 2007.

Since the recession, however, the average check at the restaurant had dropped from about $80 to $55, so Wiedmaier offered a daily deal with Living Social last summer to "get people talking" on social media. It did that, but it also turned into what he calls "a fricking mob scene."

STORY: Unhappy daily deal buyers cite high deal sales volume

In 24 hours, nearly 10,000 $25 coupons were sold for $50 worth of food. As the deal was about to expire last summer, Living Social warned coupon holders, and they stormed the restaurant. Many found they were unable to get a table. Wiedmaier also agreed to split the cost of the coupon 50-50 with Living Social — a bad idea, he says, given his industry's less than 10% profit margins.

Wiedmaier is lucky: With several restaurants, he's better positioned to absorb the blow of a costly deal. Still, his leap into daily deals illustrates the good and the bad these promotions can hold for both businesses and their customers.

The daily deal business model only rarely makes good economic sense for retailers and restaurateurs, according to an analysis provided to USA TODAY by the retail analytics firm Applied Predictive Technologies (APT).

Reports of companies that claim daily deals put them out of business, or came close, are increasing.

"This is the buzz and the modern way to get people to try a business, but there are other ways to get your name out there that don't carry the risks," says APT Senior Vice President Jonathan Marek, who cites e-mail promotions and Web, print or broadcast advertising.

Companies doing deals "get crushed economically" when existing customers buy deals, says APT Chief Executive Anthony Bruce.

There's also plenty of evidence the daily deal business is still thriving as it adapts to a deal-saturated landscape.

A survey out last week of 10,000 visitors to the top 40 retail websites found daily deal subscribers in that group fell 7.6% between last March and the winter holiday season.

In a more encouraging finding, almost 30% of those who redeemed a deal in the previous 90 days had never done business with the merchant before. The survey, by customer experience analytics firm ForeSee, also found more than 90% of respondents who redeemed a deal said they had already done business with the company again or planned to.

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