Wednesday, August 17, 2011

How do you feel about Groupon?

I don't know how I feel about it. I've subscribed and unsubscribed from their emails, and I've received one as a gift, but I don't think I've ever purchased one myself.

In May, I found out a lot about how they work from the retailer's end, and now I feel kind of guilty buying one. We'll use a bookstore as an example (because that's the type of retailer I was speaking to). Let's say that the retailer offers a Groupon for $10 worth of merchandise for $5. Not bad, right?

Except Groupon keeps half of the $5 that you the customer pay - so basically, the retailer is offering $10 of merchandise for $2.50. A 50% discount is sometimes at cost, so that's possible for a retailer to swallow, but a 75% discount now makes the promotion actually cost something for the retailer, even if it does bring in new business. What makes the cost different from advertising is that it can grow virally, costing a retailer much more than expected if an offer suddenly becomes hot - even with ppc (pay per click) advertising, you can set a daily dollar limit to avoid exceeding your budget. (Groupon may have that in place now, too, but the retailer I spoke with in May had been burned this way to the tune of $7,000 - a big problem for an independent bookstore).

And then there have been some reports that suggest that the new customers Groupon provides are just that -- Groupon's customers. They don't become loyal to the retailer since the store can't maintain a 75% discount all the time. They're almost-freebie hunters, trying anything at a discounted price but never sticking around to support a local business - the kind of customer that businesses are supposed to "fire". (Note that most Groupons require you to be a new customer - this isn't a way to reward your loyal fans, but to hopefully gain new ones. Only it doesn't seem to be working.)

With all of those factors, I now feel guilty considering any Groupon that requires the retailer or service provider to take a loss - but the deals aren't usually good enough for me to consider unless they're 50% off or more. So I skim the emails and delete them without clicking anyway. I will use up the Groupon I was given as a gift (tipping on the full cost of the service, a massage) but I think I'm going to unsubscribe. Again. I just don't think I want to support a service that requires independent retailers to take such a hit, in order for me to score a bargain.

What do you think? Do you use Groupon or a similar service? If so, are you loyal to the new businesses you discover that way?

8 comments:

  1. I haven't spoken to any retailers, but have read the same thing in several articles.

    I signed up for Living Social (like Groupon) for a half off Amazon deal, but that's all I've gotten. The 1/2 off house cleaning deals are tempting (I don't have a house cleaner but am *extremely* lazy when it comes to housework), but I doubt I'd hire them full time (because that's a difficult expense for me to justify) and do feel guilty about them basically working for free with no hope of gaining a client.

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  2. I maybe get one Groupon every two or three months, and I'm highly selective about which ones I buy. It has to be a REALLY good deal. I'm actually going with a friend for tea tomorrow on a Groupon deal I got last month and it was a steal, especially since I'm splitting it with a friend.

    The thing I like about Groupon is that it makes me aware of stuff in my area that I wouldn't otherwise know about. Like this tea; I would never have known about this fancy tea room without the Groupon deal. Sometimes I discover whole new neighborhoods because a Groupon deal has brought me into an area I never would have gone otherwise.

    I don't think you should feel bad at all about buying the Groupons. There's nothing forcing the retailer to offer the deal; it's not as if you're cheating them out of money in some way. They took a business risk by offering the deal, just like they take a risk by offering another type of coupon or spending a lot on a fancy advertising campaign. In other words the Groupon might not work to bring in new business, just like another deal or offer might not work. No reason for you to feel bad about that :)

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  3. I can understand feeling bad for independent retailers. People get used to the low prices and deals. However, I've seen good deals Groupon, Tippr and Living Social for major retailers (like Amazon, Land's End Canvas, the Gap) and I feel it's ok to take advantage of those deals. Plus, if I really do discover a good service/product, I would go back even w/o a discount.

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  4. I used to subscribe - without actually buying any of them - until I started reading about their business practices and now don't want anything to do with them. I have a feeling they'll explode or implode before not too long - and people (either outside the company or inside) will lose a lot of money.

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  5. I subscribed to Groupon when I first heard about it, thinking I'd get some good deals and find some cool places in my (at the time) new city. I never actually bought one, though, because none of them were things I needed to buy anyway, so it wasn't worth it to me. So I unsubscribed then.

    I think I resubscirbed at some point after hearing about some friends getting really good deals. But then I started learning about their business practices, and saw the commercials during the superbowl, and unsubscribed for good. I find new places to go based on friends' recommendations and internet reviews.

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  6. I posted somewhere that I thought that Groupon (and all similar sites) are the devil. I had NO IDEA OF THIS PRACTICE at the time, I was referring solely to the annoying spam emails that tempt me to get things I don't actually need or even want in many cases. Now, this makes me angry.

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  7. I haven't had much luck with Groupon, mainly because they don't tend to have deals at places that I usually go. I'm actually running out tomorrow to pick up a 10-class punch card at a local yoga studio, which I got through Groupon in April and expires... tomorrow.

    Anyway, I've heard some really unpleasant things about their business practices, so I feel fine steering clear of them. Check out this article, it's one of many but explains more about the 75% discount and how it's terrible for small businesses:

    http://techcrunch.com/2011/06/09/groupon-single-worst-decision/

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  8. I use Groupon, Living Social, and also here int he DC area we have a city based one called Capital Deals to get discounts on food and experiences. Typically if I get a food based coupon it for a place I visit regularly any way, or for a restaurant that has been on my radar and I just haven't gone yet. So they most likely will get return business if the service is good. The same usually goes for experiences. I wont just buy a coupon for the sake of the deal, but it depends where it is for. I've been looking for a hair cut deal, and there have been some REALLY good ones in my area, but because they are usually too far away, or I've never heard of them (or they have bad reviews on yelp) I have yet to purchase one.

    I always wondered how much business these services actually brought to the companies that use them. It's a shame they are taking such a loss sometimes!

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Thanks for commenting!