What’s Wrong With Groupon (and How to Succeed Anyway)

Small Business Advice April 22, 2011 By Susan Payton

The first wave of reaction from retailers to Groupon was overwhelmingly positive. Where else could you get hundreds of people to buy from your business so easily?  The second wave wasn’t so positive. Businesses were losing money on the deals, and didn’t have the staff to accommodate the customers.

So where do we fall now? Is Groupon inherently evil, or is it a fantastic marketing tool? The answer, I’m afraid, is up to you.


The Problem

In looking at the businesses that suffered from their Groupon (and similar deal sites) offers, the connection seems to be a lack of preparation and unrealistic expectations. Restaurants simply didn’t have the staff to take care of the steady flow of traffic they’re likely to see after a deal.

Then there’s the revenue (or lack thereof) generated from the deal. Word has it that Groupon takes 100 percent of any deal under $10 (the assumption is that once customers visit your business for the deal, they’ll spend more than the $10). Many smaller coffee shops suffer because the average bill is $10 or less. It turns out that Groupon fans are cheap, and don’t really like spending more than the value of the deal.

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