| Sooner or later we'll see a groupon deal for the 99c pizza! What we effectively have is an arms race in not just pizza, but one can argue that it's happening in all of NYC value to 3 star restaurants and spas and other commodity services via various promotions created to get traffic through the door. The jury is still out there to see if traffic can be converted into loyal customers (which I argue NO for NYC) whether that's groupon vendors or 99c pizza. What's the difference between a restaurant that charges 99c cheese pizza but 2.00 for pepperoni pizza v. a spa that gives 70% off of a $100 spa service through lifebooker or groupon deal sites? (btw, if you look at the way these coupon site's business model works, $100 70% off that you buy for $30 doesn't mean vendor gave only 70% off. Groupon take ~30% of that $30 so vendor really only get $21 in return for value of $100. Furthermore, groupon squeezes net working capital by giving that cash to the spa after 15-20-45 days from when Groupon received the money). Both type of businesses should be near break-even profitability at best UNLESS THEY HAVE THE ABILITY TO UPSELL their services/products or they do it to drive in traffic in hopes of converting them into return customers (marketing cost of doing business). However, in NYC where there are 10,000+ restaurants and hundreds of groupon-esque deals daily and in every corner there's a 99c pizzeria, this traffic is worthless traffic and it's permanently creating a lower RONA (return on net assets) for the entire industry. These pricing schemes get played out in the convenience stores as well in the boonies (w/r/t cigarette and beer pricing). Maybe these local vendors are smarter than I think and have figured out a way to upsell people into purchasing 100% premium pizza for 1 additional topping or restaurants make up the discount and stay profitable through selling higher margins products in conjunction with the coupon (alcohol for instance is 100% margin product) -- so then at spas, I would hypothesize that the upsell potential to be much lower than restaurants so they're just f'd. But to say that we can last longer than the other vendor is completely moronic and naive view of their customer base - why don't they ask abercrombie and fitch and every other u.s. retailer what happens when they turned promotional in 2008 and now they've tried to curb heavy promoting. Price Stickiness is very hard to get rid of for the consumer especially on the value end of the spectrum. Regardless of all these pricing wars, one can't imply that all pizzeria's margins are toast or all restaurants are toast. Jean George has no problems filling his seats at his michelin star rated restaurants offering no groupon just like Artichoke Basil, a late night pizzeria, in NY doesn't have any problems selling great artisan pizza at an overpriced price to clubbers coming out of the Avenue and 1-oak (2 super-exclusive bottle service only high-end nightclub in NYC) at 2am. That's just smart business and superior product -> turning a commodity business into a sought after premium charged product. If you're spending $500 for 1 bottle of grey goose to get into a club, you're completely fine coming out drunk and spending $10-$12 for a small pan pizza as long as it looks like high-end. |