Two stories about Groupon caught my eye this morning: “Groupon Was ‘The Single Worst Decision I Have Ever Made As A Business Owner‘” on TechCrunch, and “Groupon Is a Straight-Up Ponzi Scheme” on the Knewton blog. The headlines say a lot about where opinions about Groupon are heading, and they reflect my belief that it’s usually a very bad deal for the merchant. Two major issues with Groupon that have prevented me from recommending it to my clients:
1. Their margins are unbelievable. The merchant first has to absorb a significant discount, and then Groupon takes a pretty huge cut of what’s left.
2. Their salespeople–or at least the ones I’ve encountered–are very pushy (as the merchant in the TechCrunch story says, “[t]he sales process seemed like buying a car”). I looked into it last summer for a restaurant client, for example, and suggested February or March as the best time for a deal since then when the business most needs a boost. The rep, however, tried to convince me I’d be better of doing it “now.” Every reason he gave to support that opinion seemed to be right for Groupon without having any benefit to my client. I said no, and they continue to call me about the same client. I ignore their calls.
Now, there are times when I think a business might benefit from considering a Groupon-like deal. A brand new retailer looking to attract customers, for example, might need the initial boost that an offer could provide. (One word of caution, though: hair salons, spas, tanning salons and other businesses that rely on customers making appointments should avoid Groupon even if they’re brand new. If your deal is “successful,” you’ll end up with a book full of low- to no-margin customers.) But remember, Groupon isn’t the only game in town. Interact with Groupon’s sales staff and judge for yourself, but don’t be shy about saying no. It’s likely the right decision for your business.