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Why Groupon sucks for small businesses

FramerCat

SGF, Supreme Grumble Framer
(weird... for some reason when I hit "reply with quote" I don't see the quote in the edit box... bug?)

Anyhow: I don't consider a Groupon buyer to be a "customer" unless they come back and pay full price. A majority of my Groupon customers are one-and-done; I see them for the deal, then never see them again. I have a couple that show up consistently when I do a deal, but never darken my door at any other time. I can probably count the number of good, repeat customers that we've gotten via Goupon and the like without taking my shoes off. I'd say maybe 1 in 50. Viewed this way, the customer-acquisition cost goes from $80 to $4000.

That's why I don't do these deals anymore.
Are you losing money on the Groupon customers that are not coming back? If so, then I think you are right and Groupon is not for you. It seems your margins are not wide enough or your material costs and labor are too high to support this kind of marketing. In either case you have assessed your experience and decided that this is not the right fit for your style of business. I completely respect that. When you were running Groupons, did you get contact information from the customers and follow up with emails or newsletters?

Once again, from what you are saying I am guessing that you have not run Groupon in at least a year, because the deals are no longer structured the way you describe. A Groupon customer will not get a second email for the same business. It is also more of a long term subscription type of format now so that the orders come in slowly over time.

Like I keep saying Groupon is not for all businesses, but it does not destroy all businesses either. My business has been thriving with this type of marketing for three years now. If it was going to put me out of business it would have happened by now.

Ed
 

DVieau2

PFG, Picture Framing God
Over the past couple of years I've been nudged by suppliers to run a Groupon or Living Social deal.

My reply was that I'll do it if you guys share some of the pain. How about half price moulding on each frame I sell via big discount. No takers on that idea but I would still consider that kind of arrangement.

Going head to head with the BB's would be a lot more doable with help from our suppliers.

Doug
 

tedh

SPFG, Supreme Picture Framing God
Over the past couple of years I've been nudged by suppliers to run a Groupon or Living Social deal.

My reply was that I'll do it if you guys share some of the pain. How about half price moulding on each frame I sell via big discount. No takers on that idea but I would still consider that kind of arrangement.

Going head to head with the BB's would be a lot more doable with help from our suppliers.

Doug
Doug: This is one of the best posts ever on the Groupon subject.

Why aren't the suppliers sharing the pain? Don't they benefit as much as us? Agreed that our time and overheads are the largest component of the job, so they should be happy to pitch in.
 

Joe B

SGF, Supreme Grumble Framer
My reply was that I'll do it if you guys share some of the pain. How about half price moulding on each frame I sell via big discount. No takers on that idea but I would still consider that kind of arrangement. Doug
YEA RIGHT - AIN'T NEVER GOING TO HAPPEN!!
 

Joe B

SGF, Supreme Grumble Framer
That's why I don't do these deals anymore.
Jim, I've said it all along - Groupon and Amazon Local are not for every shop. If I didn't get a good return on both customers and money I sure wouldn't be doing it. Joe B
 

David N Waldmann

SGF, Supreme Grumble Framer
Why aren't the suppliers sharing the pain?
You're saying there's pain, and you're subjecting yourself to it voluntarily, but you want someone to share it with you?

In the case where a supplier is urging you to do a Groupon, it's understandable to say "you know, if you could help me out it might just work", but otherwise, no.

One thing you also need to understand is that a supplier has a much much higher COM than a frame shop does. Most suppliers are just buying and selling - no manufacturing/assembling of any sort - so there is no direct labor involved. And generally they are doing larger orders than a frame shop, so the proportion of overhead is considerably less. Even in our business, where we are manufacturing the product, our COM runs between 40-45%. A straight distributor is probably running somewhere between 60-75% COM.

Remembering that Groupon works best for those with very low COM and high availability (best case scenario: something like an instructional class, where extra bodies and every additional dollar brought in go straight to the bottom line), a supplier is probably about as far away from the ideal as you can get. In other words, if you think that a frame shop is not the best candidate for Groupon because of the "high" COM, a supplier is far, far worse.
 

tedh

SPFG, Supreme Picture Framing God
Good points. I'm one who thinks that our business is low Cost of Goods Sold, not high. I see what you mean about the nature of the supplier's COGS being much higher than ours. But I'd still like to see some movement on their part, because they're profiting on increased volume. Not a lot, but some.

My other point on framers doing Groupons is that we should be doing exactly what the BBs are doing - pricing the job as high as possible before the Groupon discount. Pull the value lines, push the premium glass, and sell the $30/foot stuff. Then discount back . At least the margins may be survivable.
 
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