Groupon: Merchants are really offering 75% off

[JEDI]

ie: $5 for $10 worth product for the customer.

and Groupon takes half of the $5 that the customer pays for
so the merchant is left with $2.50

so basically the merchant is actually doing $7.50 off $10.

it's unlikely the merchant is making a profit at that price point. so why are they doing these deals?

 

[Wreckem]

ie: $5 for $10 worth product for the customer.

and Groupon takes half of the $5 that the customer pays for
so the merchant is left with $2.50

so basically the merchant is actually doing $7.50 off $10.

it's unlikely the merchant is making a profit at that price point. so why are they doing these deals?

To increase customer awareness in hopes the people will continue purchasing from them after the initial run of groupons.

 

[vshah]

maybe because whatever they sell is actually worth $0.50. but groupon guarantees that they will get 2000 sales.

 

[slayer202]

consider it advertising that actually gets the people in your shop...assuming you have a good product, you hope they will come back. and if they never show up, which will happen, that's all profit. it's more than worth it...

 

[Ns1]

if the customer never comes in then the retailer wins massive (+2.5 - 0 in your example). if they do come in (and then come back) then it's considered successful advertising.

win/win.

In your example it's a 7.5 loss max, figure on local deals they get capped around 1-2k purchases. That's only 7500-15k in advertising expense.


If you want to roll it out to the majors doing deals on Groupon, it's probably still cheaper than advertising on TV or magazines.

 

[bradley]

I don't know the specifics of Groupon's business model, except to say, they are spending mere fractions of their eventual 25B+ IPO valuation. They have Morgan Stanley and Goldman Sachs as their lead underwriters.

 

[daniel1113]

Plus, local retailers know how to upsell. Using your hypothetical, let's say the average customer spends $20. Take away the the $10 discount, and add in the 25% of the discount that the retailer gets back from Groupon, and the retailer just brought in $12.50 for a sale valued at $20. That's 63% of the sales total. 37% isn't too much to pay to get a new customer into your shop.

Edit: Factor in the additional money that the retailer earns from unredeemed Groupon discounts (as Ns1 noted above), and the entire campaign probably costs the retailer very little overall.

 

[V00DOO]

consider it advertising that actually gets the people in your shop...assuming you have a good product, you hope they will come back. and if they never show up, which will happen, that's all profit. it's more than worth it...

IIRC the merchants get their money when the coupons are redeem not when they are sold. Groupon will keep all the money if the coupon is never redeem. Someone correct if I am wrong on this.

 

[Mermaidman]

Interesting article about Groupon from the perspective of the retailer:
My terrible Groupon experience.

 

[daniel1113]

IIRC the merchants get their money when the coupons are redeem not when they are sold. Groupon will keep all the money if the coupon is never redeem. Someone correct if I am wrong on this.

All the information I can find so far suggests that the merchant receives 50% regardless of redemption rate, less CC processing fees, separated into three payments made over the duration of the deal.

 

[Ns1]

Interesting article about Groupon from the perspective of the retailer:
My terrible Groupon experience.

interesting comparison, thanks for the link.

 

[slayer202]

Interesting article about Groupon from the perspective of the retailer:
My terrible Groupon experience.

no offense to you, but that article blows. the author sounds like he's probably an ATOT member

 

[goog40]

Groupon's great if you want to fill your store with a bunch of Slickdeals cheapskates who are most likely going to spend the bare minimum to get the discount and never return.

 

[Doppel]

I've read of other problems with groupon, too.

I got rid of my account after 2-3 months. There were 1-2 good deals and otherwise daily offers for car detailing, dry cleaning, and manicures. It was fing sad, actually. It seems seriously overhyped to me but some people are coupon whores.

 

[Ns1]

I've read of other problems with groupon, too.

I got rid of my account after 2-3 months. There were 1-2 good deals and otherwise daily offers for car detailing, dry cleaning, and manicures. It was fing sad, actually. It seems seriously overhyped to me but some people are coupon whores.

used my carwash groupon yesterday actually. still have 2 more w00t.

 

[JS80]

ie: $5 for $10 worth product for the customer.

and Groupon takes half of the $5 that the customer pays for
so the merchant is left with $2.50

so basically the merchant is actually doing $7.50 off $10.

it's unlikely the merchant is making a profit at that price point. so why are they doing these deals?

It's called math.

 

[QueBert]

My favorite Soul Food spot in San Diego did this a few months ago. They were totally unprepared, and since Soul Food takes a long time to cook properly, when we went (Grouponless) unaware what was going on that day, it took almost 3 hours to get our food. The owners didn't seem overly joyed that the Groupons sold out, and I doubt they'd ever do it again.

 

[trmiv]

Maybe it's different in other areas, but in all the time I've been a groupon member, I've received one mildly interesting deal email. And I didn't have the money for it at the time, so I didn't even bother with that one.

 

[kranky]

My masseuse is pretty happy with her Groupon experience. I think it could work better in a service business rather than retail. Customers don't show up for their appointment or want to cancel with less than 24 hours notice? They've forfeited their Groupon. Show up 40 minutes late for a 60 minute appointment? You get 20 minutes, and your 60 minute Groupon is done.

She says her regular customers don't pull stuff like that, only the Groupon customers. Says about 1/4 of the Groupon customers ended up forfeiting the deal, and she still gets the money.

 

[Mermaidman]

no offense to you, but that article blows. the author sounds like he's probably an ATOT member

Hehheh--The author, Romil Patel, is a 'guest columnist.' Do we have a Mr Patel here on ATOT?