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Ask HN: Should I use a Groupon-like site?

9 points by garply ↗ HN
I am a partner in a retail business. We've been inundated by calls from Groupon clone salespeople (we do business in an area where Groupon doesn't exist, but has many successful clones).

To be honest, I dislike Groupon because it causes our industry to engage in behavior that seems to have a similar result as a price war. I think there exist many customers who now say: "I want to buy X, I'll just go onto one of the many Groupon clones and find one where X is being discounted today."

Moreover, I'm afraid that customers who see such heavily discounted items will question the actual cost and quality of our materials. And I'm also very concerned about the quality of these customers - I suspect many of these people are very price-sensitive and thus are not ideal for our business. I'd love to see statistics on the retention rate of Groupon customers, but no one seems to be sharing this information.

I've seen a few repeat business users of Groupon - so apparently those businesses think it's a good deal. Alternatively, maybe they're just being the most aggressive players in a price war in exchange for temporary gains.

On the flip-side, we've held off on working with these clones for so long that the annoyingly persistent Groupon salespeople, seemingly desperate for a deal, are starting to give us decent terms. My partner is more open to the idea than I am. Do any of you know business owners who've used these types of site? Any opinions?

8 comments

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iworkforthem
I would think that you have a wide range of products; from value for money items to expensive one-off stuffs. In order not to undermine the value of the business, you could try these; - package a few value for money items together, give it a catchy name. - just use it for the stuffs you want to clear out of your warehouse. It is also important to understand why are you using such sites? Is it for exposure or to get more customers? I feel that these sites are a good way to get some exposure to your retail store. Plus the selling process do not stop here. It's just getting started with your return policy, how to deal with damaged goods, selling to existing customers, etc. It's really up to you to get creative and make your retail biz stand out from the rest.
sorbits
I use it as a customer mainly to learn about places near me offering services I am interested in.

I rarely care about getting half off on a massage or kayak rental, but I do care about knowing that I can rent kayaks two minutes from here or get gelato one block from where I live, etc.

That said, I bought two coupons which were used as presents (they offered a 60% discount). I think that store will see some repeat business from me or those I gave the coupons to (and/or referrals from us), so they will likely recoup their initial loss — none of us knew about the place before I bought the coupons.

garply
The fact that you used them as a gift is particularly interesting. Obviously, the value for us is to raise our brand awareness, so the more people made aware by one discounted purchase the better.

I am lucky in that my product is almost always used in conjunction with half a dozen or more people besides the purchaser, so it has word-of-mouth built-in, but use as a gift stretches that one person further.

I am actually friends with the owner of a Groupon clone. She told me that she thought for most business owners it wasn't a great deal, but due to the "viral" nature of my product, it would probably come down on the positive side for us.

damoncali
On a related note, does anyone know how Groupon handles the situations where a deal sells so well that it could kill off the business offering it?

I've seen several cases where a photographer, for example, offers a dramatically reduced rate for a photo session, and proceeds to sell 800 of them on Groupon, booking themselves solid for the next year at loss-leader prices.

What happens in those cases?

klous
You can put limits on the quantity of your groupon deal. And once the groupon is sent out, if the purchases get out of hand quickly, you can also put a limit on the deal at that point.
exline
Due to the nature of Groupon, its nearly impossible to wait for what you want to show up. Even in a area with multiple clones, there is only so many deals in one day. So I would not be worried about someone waiting for a coupon.

I suspect most of the people who do buy from Groupon are impulse buys. I know that is my case. In fact I did it yesterday for a something that is not urgent, certainly not something I was waiting for. But now I will be giving business to a company I had never heard of before and probably would not have heard from without groupon.

You should look at it as a marketing effort that pays for itself. If you can do the deal so that you break even or better, then essentially, its free marketing to get your name out there.

AmberShah
Think of it less like a coupon site and more like a StumbleUpon for businesses. The prices aren't supposed to be sustainable, they're just supposed to get exposure.

I think it's useful for places that offer something that people would like, if they knew about it. A good example was a cupcake boutique bakery. If I got a Groupon from there and tried it, I would keep going back. Before Groupon was around, I stumbled upon a cute little bakery like that and liked it so much I continued to drive well out of my way to go to it, even though I'm sure there are a million places to buy cupcakes. I also used them as my bakery for cakes, etc.

By the way I use Groupon and have happily tried new places. A couple of times I've even opted out of the Groupon itself but remembered the place at a later date, so it's plain old advertising also.

coryl
I don't see how you could be hurt by trying the service. I think some of your fears are paranoia, for example the fear that customers will "figure out" your margin.

Try it out, move some volume at a discount.