Is Groupon Good for Business?

After watching the Freakonomics movie, I started thinking about this…

I’ve been on the mailing list for the “Flash Sale/Deal-of-the-day” site called Groupon for several months.  It was not until I learned about a Blackberry application did I actually take note of the “deals” and purchase one.

Although I had a good experience and saved 55% off a lunch I would have paid full price for I could not help but notice how many people were taking advantage of the same offer.  I heard the word Groupon mentioned by customer and staff repeatedly.

The place was packed more than I’ve ever seen before & tempers were starting to flare as the number of seats came into short supply.  The constant attempt by the waitstaff to turn the tables, no doubt to help get everyone moved through the system, was also a big turn off.

I’ve started going back through my Gmail archive looking at the previous deals and I’m pretty surprised by the size of some of the discounts (80% in some cases).

This leads me to a couple of conclusions/questions:

  • There’s a tremendous markup in a all of these products and services
  • Businesses are willing to break even (or loose a little money) to bring in new customers
  • If I get a large discount for a product or service, am I going to be willing to pay full price for it again?
  • If hundreds of people take advantage of a service, such as a hair salon, how many weeks can that business survive with decreased margins and what about the regulars who suddenly cant get an appointment?

How are these online services any better than the Entertainment books we’ve all bought for $20 at one time or another that gave us hundreds of buy-on-get-one coupons for places we would probably never check out were it not for the “deal”?  A little research online revealed that Groupon takes 50% of the already discounted price and then pays the rest to the business over 2 months.

I’m going to continue using the service & look forward to some good deals while doing so.  So my take is this, if you’re a consumer these deals can be great.  If you’re a business, be very careful before jumping on board…

Finally, if I can’t get into my dentist or barber because of one of these deals I’ll quickly change my opinion!

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