Why retailers won’t be surprised to hear Groupon is facing an OFT investigation.
The Office of Fair Trading has confirmed that it is investigating daily deals website Groupon, after being referred by the Advertising Standards Authority. The OFT has actually been secretly investigating the company since July.
This won’t come as much of a surprise to many UK retailers who have been vocal to Retail Week about their dislike for the way the company does business.
We asked 20 board-level executives about their views on social commerce as part of the off-the-record interviews we conducted for our new report Multichannel Now 2012. The responses were compelling.
One grocery director says there is no strategic way to use it. And a commercial director calls it “a flash in the pan”.
Others pointed out that it takes a huge cut of the business its deals can generate. “Groupon is a tough business model and it is not for us. The slice it takes from the vendor is too high, so it lends itself to service industries rather than retailers.”
But perhaps the most compelling argument for why retailers shouldn’t work with Groupon comes from a chief executive of a big-ticket item retailer.
He points out that UK retailers are already expert at creating and marketing customer propositions: “I think it is a flawed model, personally, in the sense that if you have a mass-market retailer, you already do that job of making sure customers get good value.”
While none of these comments accuse the company of actual wrong-doing, no doubt these retailers will look out for the finding of the OFT investigation with interest.