Everyone loves a great deal, whether it’s for a casual restaurant or luxurious spa. If you’ve been living under a rock, Groupon is a convenient online site that finds these steals for consumers without clipping coupons. It claims to help struggling local businesses gain new customers and sales, but merchants in the service industry must beware that Groupon may potentially hurt their business instead of improving it. The online site looks out for the consumer’s best interest and not the business.
Local businesses look to Groupon as an alternative to traditional advertisements. Groupon will draw in merchants by creating a promotional deal up to 50 percent off in which they promise sales increase and new clients. According to Huffington Post writer, Amy Lee, “one merchant proclaimed that signing up for Groupon was the “single worst business decision” she had made. Her story echoes other merchants who have claimed that Groupons result in unprofitability, administrative nightmares, and, to cap it all off, that they don’t result in new regular customers.” Groupon makes it hard for merchants to profit from these low deals. In some instances, businesses in the service industry end up losing money.
I’ve had the experience of working with Groupon at my current salon job. The company has been struggling so they thought it would bring great opportunity to gain new customers and increase sales of monthly memberships. I believe bringing Groupon into the company had the opposite effect. I’ve found that most of these customers already existed in our system and only handfuls were new. In addition, clients who seek bargains will wait around for the next deal to pop up on Groupon. I kept seeing the same, reoccurring customer purchase one Groupon deal after another. They would never sign up for memberships after their deal was used or expired as the company anticipated. After we would stop running the deals, majority of our clients would discontinue using our services and search for better deals elsewhere. In this case, I believe Groupon did not work in our favor and devalued our company even more than developing it further.
Sources:
http://www.bu.edu/today/2011/groupon-bad-for-business/
http://www.huffingtonpost.com/2011/06/10/groupon-merchants_n_874896.html
http://www.pdco.com/node/88470