U-Deals Represent a ‘Profound’ Shift in Consumer Dynamic

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Location-based social network Loopt recently announced the launch of a daily deal program called u-Deals. Unlike most other (retailer-driven) daily deal programs, u-Deals allows consumers to create their own deals based on their particular needs or preferences. U-Dealers are then encouraged to talk up their deal with family and friends in order to bring enough people on board to put the deal in to play. Provided enough people join the deal, Loopt will pitch it to the business in question. The local pizza joint for example, may get a knock on the door saying there are 500 customers who have already paid for 25% off pizzas if they’re interested in the business. If the pizzeria owner agrees, the deal is done.

The first u-Deal — $35.00 for a $100.00 Virgin America ticket voucher — sold out in 48 minutes.  Not bad.

What I find surprising about u-Deals is that much of the press it has received dismissed it as not much more than a “reverse Groupon” and not an overly intriguing concept. At best, some saw it as a slightly different spin on the same old concept. There are a couple of reasons I think such comparisons are a mistake and feel that the u-Deals model may be more profound than it first appears.

From Consumers to Producers
Whereas Groupon conforms entirely to the historic dynamic of retailers promoting their offers to passive consumers who either act on the deal or don’t, u-Deals is quite different.

The strength of u-Deals lies in users promoting the deal to one another to make it happen. It relies on people leveraging their social network to drive the offer  In the process, otherwise passive consumers become the producers and promoters of deals. This creates a historic shift in the dynamic between retailers and their consumers. In short, the retailer is no longer solely in control of what gets promoted, when or to whom — their marketing is no longer their own.

Whether Loopt or some other entity harnesses it, hyperlocal social tools give consumers the capability to pool buying-power where it benefits them.

From Promotional Scheme to Buying Model
Groupon isn’t much more than the digital equivalent of someone stuffing flyers in your mailbox. It’s essentially a mass-media concept leveraging new media technology — and, as such, it can’t really move beyond simple promotional objectives.

U-Deals gives us a glimpse into what could be a future model for consumer buying behavior.  It speaks to the ease with which consumers can be organized and mobilized to pool their respective product and service needs in the interest of collective gain. It’s not difficult to foresee a point where consumers with similar brand tastes and consumption patterns are systematically brought together to buy en masse. As for distribution, Amazon and others have clearly demonstrated that centralized distribution of products is no longer and essential component of profitability. There need not be a stopping point between the source of supply and the consumer, which leaves an awful lot of profit on the table for manufacturers and distributors to play with.

All of this hints at the potential for consumer buying groups that could potentially hold significant sway over and possibly even dis-intermediate certain smaller retailers entirely.  A thousand toasters is a thousand toasters, regardless of who buys them!

The point is that whether Loopt or some other entity harnesses it, hyperlocal social tools give consumers the capability to pool buying-power where it benefits them. What u-Deals affirms is that the era of collective consumption is upon us and cannot help but change the nature of retail forever.

Retail industry futurist Doug Stephens is the founder of Retail Prophet. Doug speaks, writes and consults for companies, trade associations and governments across North America and Europe about the evolution of retail and consumer markets. His research and views have been featured in business press, and he sits on the board of the Location-Based Marketing Association.