Wednesday, August 31, 2011

Consumer Fatigue Hits The Email Coupon

It’s a sign of deflation when people groan at word of more low prices from more merchants. It was the first sign of recession in December 2007. Consumers started to recoil at the intensity and intrusiveness of the Christmas-season sales. It was that episode that inspired me to coin the term “bargain-weary.” Now shoppers are wearying of bargains again, and this time, they aren’t waiting till December. Ben Parr writing in Mashable asks, “Are We Approaching the End of the Daily Deals Era?” noting the stunning collapse of the Groupon phenomenon, where activity has declined by half in barely two months. Groupon specializes in heavily hyped daily offers by email, and it was just a matter of time before the hype wore off. But if Groupon is not doing so well, its competitors are doing even worse, with two of the large competing operations shutting down this summer.

It can’t be a coincidence that people are getting tired of the gimmickry of one-day email bargains at the same time that consumer confidence has hit a three-year low. The fundamental problem with daily email coupons is the same as the problem that eBay faced after the novelty wore off: no matter how good the deals are, if you go out and spend a substantial sum of money every day, or even just several times a month, you end up broke. It’s only natural, at that point, to come to resent the “amazing” deals that took away all your money. That’s when hype becomes humdrum and bargain-happy gives way to bargain-weary, and people start to notice just how intrusive the email coupon services are. Of course, the more savvy consumers start to become wary well before they are financially exhausted, and that seems to be the point that the average U.S. consumer has reached.

The economic risk, of course, is that in shutting out the hype, consumers may shut out most of the commercial system, spending sharply less as a by-product of trying to avoid the annoyances of commercial culture. It does not take an enormous number of consumers spending 10 or 20 percent less to put the economy as a whole in retreat.