NPR Did A Story on Groupon's Effect on Small Biz

[expatpumpkin]

As we've discussed on here before, Groupon (and Living Social, Amazon Local, etc.) don't seem to be the best deal for the small businesses...

www.npr.org/2012/07/06/156333505/for-some-businesses-daily-deals-have-a-dark-side

Obviously, the massage parlor lady should have run the numbers - hey, not everyone is cut out for small business - but what a raw deal for her...

Also interesting was the effect on Yelp ratings post-Groupons.

[brit1017]

My mom owns a small business and was approached by Groupon or Living Social (can't remember which). The deal they proposed to her was insanely low, especially considering the percentage that went to them. When she ran the numbers, she would have lost a ton of money on each customer and it would have bankrupted her. I think there is a fine line that businesses face between bringing in new customers and losing money that they can't afford.

[AAM2012]

Why would a small massage place agree to sell 4000 groupons? Do they have no common sense?

I signed up for an accupuncture groupon and will likely be a returning customer. However I have a friend that chases groupons and will drive to another town for a massage or whatever for cheap and will never return.

[Deleted]

We use Groupon to try new restaurants. We've gone back to many that we tried via Groupon.

[expatpumpkin]

Jul 6, 2012 18:12:41 GMT -5 smileyface said:

We use Groupon to try new restaurants. We've gone back to many that we tried via Groupon.

I can see where they're good for restaurants and experiences. Especially restaurants, since you'll usually order more than just what came with the Groupon (alcohol, dessert, etc.). And if you like it you'll return. We've also tried out restaurants with Groupon and become return customers.

I think the danger is with services such as those provided by nail and hair salons, etc. And massage parlors, obviously People are looking for a deal on these "necessary/regular" self-maintenace services. So they use the Groupon and then move on to the NEXT deal down the road.

Plus, it creates a mindset in the consumer of "Why pay full price when there will be a Groupon?" I've been guilty of this thinking...

ETA: I've also felt that I wasn't receiving the best service a few times when using a Groupon to get a personal service (nails, facial). I'm sure the employees are probably tired from the increase in volume and are just churning out the services, but it makes me MUCH less likely to return if I feel that I was treated like a second-class customer.

[Deleted]

Sadly, I think this happened to our paint job. We got an amazing Groupon deal and had to pay extra on top of it (which I did happily) and the guy gave us a great discount on the extra. But then he was unreliable and did a fairly crappy job. I am certain it was because he was in a hurry and not making any/much money off of the Groupon jobs so he was taking other full priced jobs in the meantime (for example he didn't come one day when he was supposed to because he had to power wash a house). While I don't blame him for rushing or being oveworked on a personal level, I also can't use him again or recommend him for a full priced job because of the quality of the job he did on our house (I assume the poor work was because of the Groupon but I have nothing to show me that the next job will be better, KWIM?). Which is too bad because in the end he burned a couple of days of work and won't see any return business from it.

[thegooser]

I bought a Groupon massage and the people would not call me back, for weeks. So I complained to Groupon. The following is an excerpt from my very angry email:

"Groupon should have considered how many appointments this business could accommodate before they let them sell over a thousand appointments with a Groupon that expires in November. Let me do some basic math for you: 1,000 appointments divided by 6 months is 166 Groupon appointments per month, or about 40 per week. Do you honestly think that they have the staffing and office space to accommodate that bump in caseload? OBVIOUSLY NOT."

I did get my money back, but I will definitely use common sense in the future to ensure that I don't buy a service that they won't be able to fill.

[niemand88f]

Jul 6, 2012 18:12:41 GMT -5 smileyface said:

We use Groupon to try new restaurants. We've gone back to many that we tried via Groupon.

Me too. I also make sure to write a positive review on yelp if the restaurant is good- I won't leave a negative one unless it is really really bad.

Last year in Utah a deals site called CityDeals made a perfect example of the flaws in this system (article). Basically they weren't paying the merchants, so many merchants were not honoring the coupons because they would make $0 and lose even more money. Then customers were upset at the merchant and at CityDeals, and CityDeals disappeared for a few weeks. SOMEHOW they sorted out the mess and are selling coupons again, but the quality of deals on their site is much lower since so many merchants got burned.

[Deleted]

I've not been using Groupon or LivingSocial for local things lately because I hate dealing with trying to use them. It seems like the only restaurants that use them around here are already on the verge of closing and the attractions and salons get so full and booked up it's easier to just pay full price somewhere.

[oukapu]

I only buy them to a few to places I regularly go to. I bought one to a restaurant I went to once before and I could tell the place was struggling when I went with the groupon. If I see a restaurant on groupon, I am less likely to go there with or without a groupon because I figure they are struggling and want more business.

[Deleted]

Jul 6, 2012 22:39:02 GMT -5 oukapu said:

I only buy them to a few to places I regularly go to. I bought one to a restaurant I went to once before and I could tell the place was struggling when I went with the groupon. If I see a restaurant on groupon, I am less likely to go there with or without a groupon because I figure they are struggling and want more business.[/quote

That's interesting. I've not found that to be the case around here, although obviously I can't comment on every business that offers one. I frequently find groupons/living social deals for places I actually eat and things I actually want to do. Tomorrow night I'm going to see a local production of "Hairspray" for half price, for example. I was going to buy full price tickets but got a sweet deal.

I do think it is unfortunate when people oversell and end up running into trouble because they have more business than they can handle, but the cynic in me thinks that if you are that stupid when it comes to making business decisions then maybe you're doing yourself a favor by going out of business sooner rather than dragging it out.... but the companies selling the deals should also provide better guidance when setting these up.

[backinpgh]

I agree with pp that many merchants who end up selling Groupons/similar are already struggling, which to me demonstrates that they are not good businesspeople to begin with, which is also likely why they end up agreeing to something as ridiculous as 4000 Groupons for a business with only a handful of employees.

[pantsparty]

Service-based businesses, especially, don't seem to consider the impact. Or the maximum that they can sell.

I think most Groupon customers are deal-seekers, which isn't a bad thing, but Groupon acts like the business will get TONS of repeat business. I don't think that's the reality.

[basilosaurus]

Here, in a tourist mecca, I've used them to go to some things that normally would be overpriced. It's basically like offering a local discount. For instance, we did a catamaran cruise, something we would normally never bother paying for since we have friends with boats. However, it was far more enjoyable than I anticipated, and they said they would be happy to honor our groupon price if we ever returned.

I'll also use it to try a new restaurant, and I'm more than happy to return if the food is good. And if it's not, I'm just glad I didn't spend a ton of money.

I did buy a hair groupon when I first moved here b/c it's not like I knew where else to go. If the service had been good, I totally would have returned.

[Deleted]

I'm on the lists for groupon, living social, activebuys, etc. I rarely buy coupons unless they are to places we normally go. However, I discovered a new dance supply store much closer to our house than the one we've been using.

I didn't buy the coupon for the dance store, but I plan on going there next week to get SD new pointe shoes

[vanillacourage]

I worked at a place that did a Groupon and we did not make money on the deal. We had to consider it an investment in marketing to get new customers in the door.

[GailGoldie]

this isn't that new - an article just like this was out maybe a year ago- i think it was some cupcake business that couldn't handle the amount they sold, etc. it's not anyone's fault but the business owner.

[thegooser]

Jul 7, 2012 7:59:15 GMT -5 pennypenny said:

Jul 6, 2012 19:06:36 GMT -5 thegooser said:

I bought a Groupon massage and the people would not call me back, for weeks. So I complained to Groupon. The following is an excerpt from my very angry email:

"Groupon should have considered how many appointments this business could accommodate before they let them sell over a thousand appointments with a Groupon that expires in November. Let me do some basic math for you: 1,000 appointments divided by 6 months is 166 Groupon appointments per month, or about 40 per week. Do you honestly think that they have the staffing and office space to accommodate that bump in caseload? OBVIOUSLY NOT."

I did get my money back, but I will definitely use common sense in the future to ensure that I don't buy a service that they won't be able to fill.

See I don't think this is Groupon's problem. Its the business owners. They should be the one running the numbers, not Groupon. I have seen businesses use it successfully because they limit the number of offers to make it beneficial. But what I got from the first story in the article and others I have read is that the business owner wants the immediate influx of money that they will receive and don't look beyond that. Again not Groupon's fault. They are a business and want to make money as well.

ETA: I will not buy a Groupon again for mani/pedi and similar services. It has never worked out and I have had to get refunds. The businesses cannot handle the increased business. But there are smaller sites that I may try using. I have one for eyebrow threading that I purchased from RueLaLa local. Hopefully that will work out well.

True, but I couldn't even get the business on the phone to try to get my money back from them... Not that they would have given it, because Groupon gets a cut. I do think the business was also responsible, but if Groupon wants happy customers, they should practice common sense too. Selling 1,000 groupons to a local massage place does not make any sense, they are setting people up to be dissatisfied with Groupon and stop using the service.