Article: Why Groupon is Poised for Collapse

I saw this story the other day on TechCrunch too.

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

The picture of that receipt makes me want to cry.

While I agree that receipt is bad, when I use a groupon, I am often with my three kids, so I have a decent bill in the end. Plus, if I like the place, I will go back. It does give me a chance to try a place I haven't before. I hate how they seem to think bargain hunters are freaks or something. It really is a survival technique when you don't have a lot of money! Of course, not everyone will go with extra people or go back to an establishment, but they may. I don't think Groupon is a bad thing.

It's not that bargain hunters are freaks but honestly how many are going to use a service like ours? I got caught up in something similar here and it was a complete waste. I was so mad at myself. Luckily it cost me far less than Groupon would have.

NONE of these people were truly interested in my product, being a customer or even telling others how good my cakes are; they just wanted what they could get on the cheap. It was dumb on my part. Before I started this business I knew I didn't want to deal with "bargain basement" types when I had a garage sale and someone complained about the price of Gap clothing that still had the tags on them. So, why I did this I do not know!

It reminds me of a suggestion from IndyDebi -- "always add value never discount". See Debi, I do listen! LOL

I have heard one too many bad things about Groupon and other similar programs. It works for some types of businesses but (from what I understand) generally not small, niche ones like a neighborhood cafe or cake shop.

Two weeks ago I was in line at my high end salon paying for my haircut. (After 20 years of going to a hole in the wall hair stylist, I wanted a change. So yes, I did choose the highest end salon in my area). There were 4 people in front of me who all obviously had manicures and pedicures. Their cost? $9.00 each. None of them left a tip and none of them made another appointment.

This past week I was at a meeting with my employees. Come to find out said high end salon did a Groupon of $9.00 for pedicure and manicure. They lost a ton of money, did not get a boost in customer clientele, and it will take a year to recoup what they lost. It pays to have friends "in the know". Otherwise I would not have found this out.

I won't be doing Groupon for my cake shop. I don't care if every other shop in town did. This story is one of the many we heard from the local businesses in the area that jumped on the Groupon wagon.

Plus, they give you a manual printout of those that bought the coupon. If they merchant does not find your name and cross you off the list there is nothing stopping you from reprinting the coupon and using it again. A few vendors we talked to found this out the hard way. This process is the same for livingsocial too.

wow, Groupon here in the UK is very different if I've understood the article correctly. There is no loan or any money paid up front to the business. A business signs up to offer a service at a discounted price, say a manicure for $10 instead of RRP $30, client buys offer on Groupon, Groupon takes percentage and business gets the rest. I wonder why it works differently in the US?

oops sorry, i misunderstood the structure then. thanks for clarifying JK.

As a consumer I am attracted to Groupon offers, but precisely because I wouldn't/couldn't pay 150 for a haircut, so if it's offered at a much cheaper price then i would go for it. this means i just wouldn't go back at full rate.

I LOVE Groupons! I have found my hair stylist, went skydiving (something I always wanted to do) and taken 3 classes at SweetWise with Groupons. I have only had a bad experience with a few. One was a restaurant that treated us like we were second-class citizens. The server was RUDE the food was burned and horrible and I will never darken their door again. I had a not so great experience with "The Cupcake Nazi" store--I won't name any names, but I was wanting to try some of their uncommon flavors. A friend of mine got the same Groupon and was treated VERY rudely by the bakery--even thought she ordered ahead. They had 2 locations, with one being near my house and the other way on the other side of town. I went to order the cupcakes at the location near my home and they just basically folded up their "tent" and moved out. I think Groupon got so many complaints that they refunded the money to those who bought it planing on going to that location. On the sky diving one, but we were kind of treated like cattle and were scheduled to jump at 2:00 and didn't get on the plane until 6:30 (I figured that company did not really expect a lot of repeat business, mostly people who wanted to try it once). They were extremely disorganized.

I think the purpose of Groupons are for a business to put their best foot forward and get new business. I don't know if these businesses have become jaded by people not tipping (I way over tip if the service is good) or what, but I have been pretty much pleased with the businesses that treat me like I am a full paying customer and it is likely that I will return.

If I were a storefront bakery, I would NOT do it because people do not read the fine print. As in the case of the cupcake store mentioned above. They only make enough cupcakes to make it through a day or two and they had so many complaints about people wanting to walk into the store and get their cupcakes without pre-ordering (it CLEARLY said on the Groupon order 24 hours ahead and you can get 3 each of 4 flavors). And people who did pre-order got mad because they could only get 4 flavors. I think my friend got treated rudely because of Groupon "backlash"--they had gotten so many complaints that I think the Groupon actually hurt their reputation because people did not read the fine print. If I had a walk-in business with perishable items NOT made to order I would definitely not do a Groupon. If you offer classes and supplies like SweetWise, I think you make your money back in purchases after and before the class--even though they have pretty much everything you can borrow except the cake.

I may be a Groupon addict...

I am a UK based baker, and have used Groupon here; and no, we don't get the money up front.

Once the Groupon has closed, the voucher holders start contacting you and booking - we then take their voucher secuirty number, and feed it into a webform.

Each day, we are emailed a statement of how many have been redeemed that day, and the money is transferred into your account. If someone doesn't redeem their voucher, then Groupon keeps 100% of their payment, as we can't claim it. So the set up is very different over here than in the states.

We used Living Social (as opposed to Groupon) for our Cake Show this year. Living Social is based in DC, where I am, and they love cake things. They were really helpful for us.

We had a HUGE success using them this year. While we offered basically 2 for 1 admission, people came and bought everything pretty much from our bake sale, which turned it's biggest profit ever. One vendor at the show completely sold out of all their fondant. Others were doing a brisk business as well.

I think, depending on what you're doing, it's a great item.

I think Margin is really what affects this, from an economic sense. Lower margin items probably won't do so well and feed into the article. Items with a high margin, or ones that aren't really looking for repeat customers, will do much better. I think that's part of the flaw of this article is it doesn't account for enough different situations. I did, however, see Groupon had an IPO (or is thinking of one), and I would be running far away from that.