NEW YORK (MainStreet) — There are daily deal sites for everything from restaurants and hotels to comic books and marijuana, but until recently there were no websites specifically offering group buying discounts on what is arguably the most essential shopping trip for consumers: groceries.
If you want to find deals on everyday products like eggs, juice and cereal, there is certainly no shortage of coupon websites and newspaper circulars promoting dollar-off deals or buy-one-get-one-free offers, but shoppers would be hard-pressed to find the kind of limited-time 50%-90% off daily deals that websites like Groupon and LivingSocial have turned into the new normal.
LivingSocial made headlines last month when it sold $20 vouchers to Whole Foods nationwide for half price, a deal that was purchased 1 million times. Groupon dabbled in the grocery market earlier this year as well, partnering with General Mills to sell a sample pack of cereals and snack bars in Minneapolis and San Francisco, selling out in a matter of hours.
The incredible popularity of these grocery deals is as notable for showing the huge consumer demand that exists as it is for highlighting the scarcity of similar offers. While Groupon would not say exactly how many grocery promotions there have been, the company did admit to MainStreet that there have only been a “handful.” LivingSocial did not immediately respond to a request for comment.
“The deal pipeline in each Groupon market is determined by local consumer interest and merchant availability. Grocery deals have been successful for us and we're definitely open to doing them again," says Julie Mossler, Groupon’s director of communications.
Based on the success of the few grocery deals so far, consumer interest is clearly not the problem, which by Mossler’s own explanation leaves only merchant availability to explain the limited number of these deals to date. However, the real answer is a bit more complicated and boils down to a combination of inventory and timing.
The Problem With Grocery Deals
Groceries differ from other consumer products in two potentially problematic ways: each food product has many subtle variations and virtually all of them can expire. We might call this issue the “orange juice paradox”: When a grocery store offers a deal on orange juice, it has to specify whether it’s pulp, non-pulp, concentrate, whether it’s a quart or a gallon and whether it’s Tropicana, Dole or another brand.
“There’s such a huge number of products and choices available, the likelihood of getting a huge number of people interested in any particular option is lower,” says Geoff Allen, the founder and CEO of Ziplist, an online service that launched earlier this year and lets users upload grocery shopping lists and searches for related food deals. Once the grocery store figures out which kind(s) of orange juice to offer, Allen says the big challenge is figuring out how much each merchant needs to stock to make sure it can fill all the requests.
Let’s say a chain of grocery stores chooses to sell a voucher for half-off any gallon of Tropicana orange juice in store, whether it’s pulp or non-pulp, in an effort to broaden the appeal. This leaves merchants with the problem of figuring out how many of those who redeem the deal will shop at each store and which kind of orange juice they will shop for. That creates a major inventory problem as stores must struggle to stock enough to satisfy those who have pre-paid for the products but not so much that the juice starts to expire on the shelves.