Restaurant Industry Emulates Groupon and Gilt’s Recipe for Group-Buying

As flash sites like Rue La La and ideeli have diversified from apparel into housewares, beauty and travel, other online businesses have begun staking claims in their own specialties. Why should Gilt Groupe broker dining discounts when culinary brands could capitalize on their own expertise?

Zagat Exclusives, the “original crowd-sourced dining guide,” is the latest restaurant site to jump into the group-buying fray with its September NYC launch. Yelp also began testing daily deals in Sacramento, CA this July, while OpenTable just launched their version, OpenTable Spotlight, earlier this month in Boston and New York.

These are just the established companies branching out. Newcomers InBundles, VillageVines and BlackboardEats—also focused on food deals—are trying to enter this market as well.

Zagat, which will be teaming up with Groupon competitor DealOn, aims to set itself apart by functioning more like a flash sale. Specials will be offered in limited quantities for fixed periods of time with no minimum number of participants. The twist is that the price will lower as more people join. When time runs out, the listed price is what everyone pays.

There’s no secret why these sites, which normally rely on daily emails to get the word out about discounts, are flourishing. According to Valpak 66% of Americans say they’re currently searching more for coupons and discounts than in the past, and 75% will continue this behavior even after the recession ends. Combine that with the fact that across all age ranges, offers sent through email are the best way of getting consumers to try restaurants, and it’s clear that these inbox-filling online sales are paying off.

As more players enter the increasingly saturated dining deals market, more niches are being filled. It’s no longer just half-off falafel, but discounted multicourse tasting menus at Michelin-starred restaurants—that still cost hundreds of dollars. The “foodier” these sites get, the more aware they need to be of public perception and the potential for appearing desperate.

When I recently received an OpenTable message touting a half-off special at Gordon Ramsay at the London, my first thought wasn’t, “Oh, I’d like to eat at the restaurant of that chef who yells on TV.” I already knew this was a restaurant on its last legs and now it had been made obvious. This critical sentiment was consequently echoed on food blogs.

In the more dining-savvy—some would say snobbier—cities, do customers want to be eating in an empty room—or, gasp, with a bunch of bargain-hunters (yes, just like themselves)?

Perhaps. Coupons have lost their nickel-and-diming stigma. A Coupons.com survey conducted in May 2010 found that consumers with household incomes of more than $100,000 were nearly twice as likely to use online coupons than those earning less than $35,000 annually, at 39% vs. 21%.

The question is whether restaurants will stigmatize themselves. A good deal can serve exactly its intended purpose, tapping new audiences and putting bodies in seats. It’s yet to be seen if this approach will translate to repeat business for struggling eateries, though, particularly those with a high price point.

Zagat does offer a statistic that could be key, at least for their new venture: “Zagat surveyors visit the places they vote on over eight times per year on average.” If they can translate this type of loyalty to their Zagat Exclusives users, restaurants should have few worries about getting involved with group buying.