From Daily Deals to Point of Service Deals

I’ve always considered myself an optimistic skeptic, but I’ve never been a fan of social deal sites like Groupon or LivingSocial. giving away 50-75% of the value of your product or service just never seemed like a great deal to a local business, and even worse so for a brand like The Gap.

And given what we know about Groupon’s “nonstandard” accounting practices, its traffic decline, and its cash shortage, small businesses seem to be catching on that Groupon and its ilk aren’t exactly a great-looking deal.

Our own survey of recent daily deals users suggests that these sites are better for awareness than loyalty: 24% of those who have used a deal in the last six months for a retailer that they had never heard of before reported that they have used the vendor at least once after using the deal; only one in 10 reported that they either have or intend to visit a retailer that they used previous to redeeming a daily deal coupon.

So it was no surprise to us to hear that Facebook closed its Deals offering, followed closely by Yelp’s Deals scale-back announced yesterday. Also on the Deals front, Greg Gomer of BostInnovation posted some interesting speculation on SCVNGR‘s loyalty-turned-mobile-payment program LevelUp, particularly regarding their new marketing push targeting local influencers and local restaurants:

Additionally, many retailers often cite that the number one issue they have with deals sites like Groupon is that it is difficult to close the marketing loop with those who redeem a daily deal coupon – The deal sites retain the end customer contact information, leaving the retailer without any means of follow-up.

This makes the move to mobile payments for SCNVGR the right play. When a deal is integrated directly with the retailer’s Point-of-Sale (POS) system – much like a standard loyalty card – the retailer can follow up with the their existing customer and close the loop, as well as offer deals at any time before and during the payment process.

The POS 2.0 trend has been going on for a while: system after an extended pilot, CardStar is approaching deals by partnering with existing loyalty card programs. Even the POS system has become mobile, with card reader Square now processing over $4 million in payments a day (including many of the food trucks in Boston I love so much). American Express skips the POS system entirely and gives deals to Foursquare providers.

Additionally, if SCVNGR’s LevelUp program can provide small businesses with deeper customer insights and trends that they otherwise wouldn’t be able to surface – something that is near impossible to do with today’s major POS providers – savvy retailers would recognize that this is a worthwhile, business-sustaining service. Many hurdles remain: How does SCVNGR deal with the competition as well as the currently antiquated and fragmented POS system market? And what does it mean that one of its first investors also has a mobile payment solution with Google Wallet?

Credit: Image by Nick J. Webb on Flickr.