Nowadays, when we think of paying for a service, do we think of paying the full price? Or, do we rush to our beloved discount apps? Discount and shared services like Groupon, Airbnb, Uber and beauty services like Glamsquad have graced our presence with their affordable options and convenience. And as much as we LOVE these options and how much moolah we’re saving, what does it mean for the industries that they represent?
Online voucher services such as Groupon include dining, beauty services, activities and more. Businesses can promote discounts for their services at a very affordable rate. But firms considering whether to offer discount vouchers need to consider whether these discounts are profitable for them. For instance, they would be profitable if they predominately attracted new customers who would regularly return, paying full price on future visits. They also help with promotion by sending emails for discounts to local consumers, making it easy and affordable for these small businesses.
Other examples of online services include Airbnb and Uber. The Sharing Economy, also known as collaborative consumption, is a peer-to-peer based activity that obtains and shares access to goods and services through community-based online services. Airbnb allows people to rent out their home, while Uber is a form of taxi service with people operating from their own vehicles. These services have grown undeniably popular over the years, despite the companies themselves not actually owning any hotel rooms or cars. And there’s no question about how affordable they are. Airbnb can give you an entire apartment in central Paris for as low as AU$60. As for Uber, a trip from Brisbane City to the Gold Coast would cost approximately $120-$161, compared to taxis which would cost approximately $173-$242. As well as this, customers can leave reviews, which can make or break the rest of your sharing career.
Beauty app services are much newer on the market, and lesser known than Groupon, Airbnb, and Uber. Glamsquad—hailed as the “Uber of beauty services”—is a beauty app that you can book services such as having your hair, makeup and nails done in your home or hotel. Although Glamsquad is a US-based app, they are expanding to other countries. Other beauty apps have popped up around the nation as well. You just book online or on your phone. These sound great, right? Why should we care?
Frankly, you should care, because its killing small businesses! For one, its saturating the market. People now expect the discounted prices to be the normal price for services. As said by Bertini and Wathieu:
Constant price undercutting can damage brand equity and erode profit margins. Meanwhile, customers develop low expectations and become disengaged.
Numerous business owners who have participated in Groupon have vocally regretted using Groupon’s vouchers. They expressed surprise and disappointment that voucher customers did not often return paying full price, and that existing customers began to use discounts. For instance, instead of paying $395 for a 105min pamper package, customers can pay $79. Or, a $750 cosmetic tattooing treatment can be purchased for $199.
Like Groupon, Glamsquad is changing the pricing of the market. Sonia Roselli of Glossible, a leading makeup artist in the industry, discusses Glamsquad and how it hurts beauticians and hairdressers. Roselli claims that Glamsquad takes a 40% cut of services, which is an average of what most salons and other on-location companies take. As well as this, they take care of booking and advertising, some of the tedious work that people who run their own business have to do. However, while they take this cut, artists and hairdressers have to pay for their own equipment as well as having their own transport. As Sonia Roselli calculated, an artist would profit US$49 out of their US$95. However, in order to break even each month, an artist would need to complete 33 services.
Another reason these services are harmful is that they often don’t follow legislation. While Uber is more affordable, they did not have to pay the same regulations and licence fees that force Taxi rates to be higher. Only as of September last year was Uber legalised in Queensland. Also, as these are people who are practically working for themselves, it is hard to regulate what happens to either sharers or consumers in these situations. Airbnb hosts have lots of horror stories about , while guests have stories about racist hosts. There are even claims of Uber drivers sexually assaulting their riders.
Despite the downsides of discounted services, there are some upsides. For instance, people prefer Ubers over taxis not because they feel safer (I have almost died so many times), but because Uber is so much faster than taxis. As well as this, taxi drivers and their riders are anonymous. Therefore, should a problem arise, drivers are hard to track down. Uber customers can also share their ETA in real time to friends and family in case of an emergency.
The sharing economy has also allowed middle-class citizens to become entrepreneurs. Most middle-class people today, particularly women and people of colour, find themselves cut off from entrepreneurship opportunities due to a lack of available capital. While most entrepreneurship needs start-up capital, the sharing economy allows middle-income people to leverage existing underutilised assets, such as their cars and homes, to create incremental wealth for themselves.
The future of discounted services and the sharing economy is both wild and fascinating. There’s talks of new things to do and use, such as Uber for planes. So, while these new forms of consumption have hurt our local business, they have also improved societal needs. While we want services at a fraction of the price, we fail to realise the true cost of why it is priced that way: experience, legislation, training, facilities, and more. Now that you know the true cost of a deal, will you still be bargaining?