Is Groupon designed to exploit small businesses?
For consumers not checking out Groupon daily, you’ve gotta get there.
The super-coupon site has almost changed how retailers dole out discounts, and the deals speak for themselves. A few recent Canadian bargains the forum has offered: $25 for $50 worth of apparel at nationwide Gap stores; $49 for $300 worth of teeth whitening at a Toronto dentist; $15 for $30 worth of tapas and wine at a Calgary bistro.
Yet while the savings ring sweet for us, no doubt, what about businesses using the site? Too many customers can’t be bad for many companies, but could using Groupon be biting off more than some smaller retailers can chew?
It turns out, Groupon is indeed a double-edge sword, and one that independent retailers should heed a lot of caution before wielding.
As Groupon continues to grow (its value has now ballooned to $1.35 billion and its co-founder, Chicago investor Eric Lefkofsky, can boast a net worth of some $750 million, according to Forbes) so, too, have the complaints against it.
For instance, you’re not likely to hear many peeps about Groupon from big-time outfitters like, say, Gap, because they can handle the influx of new customers from their mass-purchased coupons. But for independent businesses, Groupon’s far reach and allegedly unfair practices make promotion through the site a case of Be Careful What You Wish For.
A café owner in Portland has become the defining Groupon cautionary tale of late, having her blog post on her dealings with the discounter go viral this month.
Her story, in a nutshell: after negotiating a “$13 worth of food/drink for $6” deal with a Groupon rep, the café owner was bombarded with customers when 1,000 coupons were sold. It sounds like a great deal, but an underpublicized clause in Groupon contracts allows the coupon distributor to keep as much as 50 per cent of the revenue from sales under $10. Further, the café owner alleges Groupon wouldn’t let her cap the amount of coupons sold, so 1,000 units at only half the profit was more than she could handle. She lost $8,000 on the deal.
Now, the café owner’s story may not be typical – and Groupon’s other co-founder and CEO, Andrew Mason, has disputed some of her accusations – but the Internet is also rife with tales of Groupon gone wrong. In another case, for example, a retailer alleged Groupon hid behind tricky fine print to sap her of some $46,320 worth of merchandise.
In almost all of these cases, it stands to note, Groupon appears to have plausible deniability to the negative claims against it. Yet that may not change the bitter taste the site has no doubt left for some of its clients.
So, if Groupon turns many of its profits with creative fine print and stubborn policies designed to expose smaller businesses, is it the fault of those companies for getting in bed with the coupon site to begin with, or should Groupon shoulder some of the blame for its controversial practices?
By Jason Buckland, MSN Money
Posted by: Bob Phibbs, the Retail Doctor | Sep 29, 2021 2:04:03 PM
Groupon and their online discount coupon clones are a serious threat to retailers profitability as well as the service industry. As owners flock to be included they are commoditizing their USP for short term expected gains. I did an extensive 11-part examination of Groupon starting with the post, Groupon Review: Worst Marketing For Your Local Business at http://www.retaildoc.com/blog/groupon-worst-marketing-business/
Posted by: John | Sep 29, 2021 5:52:40 PM
I recently purchased Groupons for my wife and I...the first time we have done this. They were for a beautiful golf resort in Austin Texas. There was a 50% off sale on each night with golf included. The place was fantastic, the courses beautiful.... and from a consumers point of view it was an incredible deal.
Posted by: Monika | Sep 30, 2021 8:58:02 AM
I as a consumer, love this site! Although I'm not aware what happens "behind the scenes" in terms of retailer losses etc but I would think that this site would in fact help small businesses by exposing them to clientele that otherwise might not have ever considered making use of their services. For example, I just bought a food voucher for a fish & chips locale in Toronto. I've been meaning to check the place out for awhile but who knows if or when I actually would have. Since I now have a voucher, I will be forced to go and eat there sooner rather than later. If I like the experience, I will undoubtedly be back as I tend to be a loyal customer once I try something and like it.