Another Deal Victim: Local Auto Detailing Shop Goes Under

Amazon LocalI thought these stories were a thing of the past. Today I got an email from an auto-detailing company in my area, from whom I’d bought a daily deal months ago. The email said the deal put them out of business.

The deal apparently sold so many units they couldn’t service everyone before the expiration date; there weren’t enough appointments. So they extended the period. I made an online appointment for months later than I would have liked to.

But Amazon Local (LivingSocial), which sold the deal, later offered deal buyers refunds. I took one and cancelled my appointment. That was earlier this year.

Today I received this email:

Hello! 

We are writing to inform you [Business Name] Mobile Auto Detail has closed. We found it impossible to service all daily deal customers in a timely and cost-effective manner. As the daily deals were offered at such a tremendous discount (net profit of 25% standard rate), we quickly found ourselves operating in the red.If your vehicle was not serviced, please contact your daily deal provider for a refund.

We apologize for the inconvenience.

These stories were more common in the early days of daily deals a few years ago when SMBs weren’t clear on the economics of running them. But I thought most SMBs had become more savvy or were steering clear of aggressive daily deals entirely.

I was quite surprised frankly. I wonder if something like this is grounds for litigation. Probably not however.

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9 Responses to “Another Deal Victim: Local Auto Detailing Shop Goes Under”

  1. Sharon Hill says at

    Is this not the fault of the merchant and not the Daily Deals provider? I feel sure they could have capped the offer – X number of takers and then no more. And how long did it run? Perhaps it should have been fewer days. Really sounds more like poor merchant management. 

  2. Greg Sterling says at

    Clearly the merchant screwed up. I don’t know what the AmazonLocal (via LS) is around capping. And maybe this is something of an excuse to shutter the business. I don’t know. 

    I would have expected the merchant to be more savvy about this sort of thing regardless. 

  3. D Philip says at

    I bought a mobile detailing deal. The guy said he had systems to wash and clean in and out. He showed up and asked to use my water, my garden hose and my vacuum. Are you serious I asked? I immediately dismissed him and got a refund from LS. This is likely the type of merchant that gets burned by dailydeal mismanagement. They do not understand the economics of the deal let alone how to operate a business.

  4. Eric Groves says at

    Great post Greg! So let’s teach the local merchant what’s going on… a short lesson on human nature, local business, the local deal of the day providers, and your existing customers.  

    Human Nature: consumers typically travel no more than 5 to 10 miles to spend 85% of what they consume.

    Local Businesses: get 80% of their customers from a 5-mile radius (even smaller in urban areas) around their business location.  These are the customers you want.  

    Daily Deal Providers: get consumers (mostly from outside your 5-mile radius) to violate their human nature (drive more than 10 miles) to get a super deal (local business loses money – daily deal provider makes money) and that customer rarely comes back (because at full price there is likely another local business within their 5-mile radius that offers a similar product or service).  

    Your Existing Customers: often get miffed because they can’t get access to the quality services you provide because all these “foreigners” are coming in for deeply discounted product or services.  

    Maybe over simplification but it should help the merchant counter the sales call they get from the daily deal provider’s sales team.  

  5. Tom says at

    Sure it’s the fault of the merchant. But how savvy do you expect a guy who washes cars for a living to be?

    I feel bad for the merchant, but this publicity is far worse for Amazon.

  6. Trevor Sumner says at

    Many business owners still don’t read the fine print and don’t think about the economics at scale. Daily deal providers are incentivized by total gross revenue so they encourage bad behavior. Most businesses do not have the margins to tolerate selling at 25% of retail (net revenue share).

  7. Sharon Hill says at

    Well, I never assume someone’s “savviness” by how they earn their living. That being said, this is not a guy who washes cars for a living. This is a guy who runs a car-washing business. Big difference. Unfortunately, there are many businesses that fail because of folks who liked or knew how to produce a product or service but failed to train in making a business of that product or service, but jumped in anyway. 

    Far worse publicity for Amazon? Nah. People have pretty much learned all they’re going to, good and bad, about the traditional daily deals process, and the only surprises are when sites such as Groupon evolve to other monetization processes successfully. This is an old issue, and as Greg said, one I’m surprised is still popping up. Most merchants have learned from early mistakes. I doubt most folks will blame the platform. 

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  9. Tom says at

    Sharon Hill said, Most merchants have learned from early mistakes. I doubt most folks will blame the platform.

    The merchants who have learned are blaming the platforms and steering clear.

    The merchants who have not yet learned are creating stories like this: of small merchants bankrupted by massive deal syndicators.

    It really doesn’t matter whose “fault” it is. The headline is always the same: unhappy customers, bankrupt small business, gigantic deal provider passing the buck.

    Because it’s NEVER their commissioned salespeoples’ fault, of course.

  10. Greg says at

    The segment imploded in part because there were too many competitors and all the email started to feel like spam. But also because the vendors didn’t take the time to properly educate merchants and try to ensure success with these deals. Merchants were early on left to figure things out through trial and error. 

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