Groupons is bad for businesses

[geForce]

Did you know? In order to offer you the 50% + discount for the stuff you're buying, the business owner will have to first sell their product to Groupon buyers at 50%. Of the remaining 50% of the value, Groupon themselves keep 25% of that. So if you're selling a $100 product through Groupon, you will only be getting $25 for it.

Another thing is - Groupon customers are mostly deal-seekers, whereas, Groupon markets their services to business owners as a way to create brand loyalty through trial and discovery.

In essence, the Groupon scheme is like loansharking in a way. A business commits to Grouponing, and Groupon fronts the business $50,000 cash (paid in instalments within a 60 day timeframe). The business is then committed to sell $200,000 worth of their products at a hugely discounted rate over a 6 - 12 month timeframe. The inflow of cash is great for the businesses, but they are not able to keep up with the huge inflow of deal-seekers that pay them next to nothing and never come back. A lot of businesses (usually small businesses) are forced to shut down and claim bankruptcy because they're not able to pay their overhead anymore.

Deals are great, but I hate seeing businesses get tricked this way. Support our businesses and boycott Groupon and all their competition!

[Wetundies]

I thought everyone knew groupons policy? The businesses can limit how many items are sold. It's just another form of advertising.

[geForce]

Businesses can limit the number of Groupons, but the allure of upfront cash is way too strong for businesses to want to limit it. That's why I said it's like loansharking... you know borrowing money from a loanshark at 50% interest is bad, but you're so desperate that you don't care.

[nature boy]

yeah, i was thinking about this the other day too. i remember one of those door-to-door companies that i used to work for had similar stuff, they would offer awesome coupons that have to be paid for upfront. these would be similar to the groupon deals that are so popular now. the idea behind it was to create the customer base that would provide word-of-mouth advertising, which is the best kind of advertising.

it was sold to me by them saying "the companies don't pay for their advertising until it's working for them". as in, they save on their advertising costs (with newspaper/tv ads or whatever) and put that money into making up for the lost revenue from the discounts. i guess it's different with groupon since the company has to pay for the service, whereas my job was a free service (i think).

having said that, i wonder how many people bought a groupon and forgot all about it before it expired.

[[JT]]

Groupon has been around long enough that businesses can get information to weigh the risks and benefits of using Groupon.

I mean, if G can find something that points out that Groupon may be bad for some small businesses, why can't the small business making a huge business decision find this out themselves? No trickery, just bad strategy!

[nature boy]

what on earth is jt doing on the forums at 2:28am? don't you know there's church in the morning? lol.

but good point. but sometimes small businesses are small because they make bad choices.

[joel]

i didn't know Group-ons were bad for business prior to this topic. Now I know and knowing is half the battle!

can't hurt to spread the news about something if you have little more info on it than others.

not sure if boycotting is best tho'. the consumer should be looking out for the consumer and the business should be looking out for itself too. if groupon helps the consumer save money then good for the consumer. if groupon helps the business get good marketing for a fair value than the business should do it too. if it's not worthwhile then they should determine that and not do it. i can understand groupon getting a cut themselves too afterall they are offering a marketing service too. if the rate is too steep then it's good that there's competition, so businesses can go elsewhere too.

[geForce]

[nature boy]

buying the states saves us money and is bad for canada's economy. i'll still buy in the states when i can though.

[[JT]]

[nature boy]

i think the difference is that the information that gordon found specifically names groupon as the shady deal, while a lot of businesses out there don't exactly advertise themselves as "pyramid schemes". they're not like, "hello, we're a pyramid scheme, you can look us up on the net, would you like to work for us?"

[joel]

[nature boy]

i think the point is really the world is an unfair place. people don't get paid as much as they should, and we'll all still be buying starbucks at the end of the day.

[joel]

and apple products.

[joel]