February 24, 2011

Groupon Redux

So I cranked out the following analysis in a fit of pique over on Facebook. Decided not to put it there (why stir things up) but I'll put it here. In lieu of actual blogging, which I have been doing little of, lately.

********************************************************************************************

So here's one way to think of it. East-West sold 345 "groupons" this morning. They sold $10 (lunch) and $15 (dinner) "deals", worth $20 and $30 worth of product. Let's average it at $12.50 and $25.

Now, Groupon takes the money from the Groupon, and sends something to the restaurant. I don't know the details but for low value deals like this it's at maximum 50% (and could be nothing, I've read that for $10 deals, Groupon takes $100%).

So East-West has just assumed liability for $25 (average) x 345 = $8625. They (hopefully) get paid $7.50 x 345 = $2588. So today's Groupon advertising cost them a bit over $6000.

Now folks will bring friends, buy more than the Groupon amount, etc. (all good) - and a certain percentage wll not be redeemed. But that $6000 in lost receipts is coming from somewhere. Assuming that the restaurant is making 10% profit on gross receipts (very optimistic, from what I have read), then East West needs to boost sales $60,000 to break even on the Groupon.

It works out fine if there are a lot of empty seats or folks visit during off-peak hours. But I don't go to East West on weekend nights - it's often full with a wait for a table. So one can assume that some of the Groupon customers are going to be taking seats from full priced customers for a while.

One can do an awful lot of advertising and buy a lot of goodwill with existing customers for $6000. But I think Groupon sales folks are pretty good at communicating "you don't have to pay anything, look at all the new customers, and we'll send you a check!" and businesses do not figure out how much all this advertising will be costing them in the long run.

I do think Groupon makes sense for a lot of businesses - if you can steer customers to off peak or slack times, if you have extra capacity, if you are new in the market or are branching out into new areas.

OK, I'm done kvetching (no, really!).....but please, if you DID buy a Groupon this morning, please tip your server based on the full, regular price of the meal. One of the gripes about Groupons is that folks tip based on the post-groupon bill - so the server / staff gets the raw end of the deal. And undertipped waitrons might be cranky and take it out on customers - even the full-fare ones. Yet another hidden cost of the Groupon experience.

********************************************************************************************

I've been a long time customer and fan of East-West Grill from the very start, and I want them to stay in business. Have no idea how well they are doing these days. But I would hate to think that one bad decision to advertise with Groupon might push them under.....so call all this sturm und drang self serving.....

Groupon - No!

This morning's Groupon deal is one of my favorite little Thai restaurants (East-West Grille) - a converted old diner that service great lunch and dinner, and has recently branched into some amazing breakfasts. I noticed it in my In Box, and one of my Facebook friends posted it to his wall.

Noooooooooooooooooooo!

I've been looking into Groupon lately for some clients, and it's not always good news for the businesses who sign up for the service. Some businesses have been driven under ...by the flood of Groupon business - often one-time customers who do not come back without a "coupon" - and in the meantime, having to staff up for the high volume, alienating regular customers (due to Groupon volume), and subsidizing the Groupon customers. Hey, we all know the folks who boast of getting a basket full of groceries for $0, through shrew sales shopping, rebates, and coupons. Not exactly the target demographic for a successful, ongoing business.

Groupon is reportedly pretty aggressive at selling themselves and their unique "deals" (encouraging businesses to agree to 50% off or more deals, etc.), and not permitting a cap on the number of deals sold. Would be one thing if one could limit the number of Groupon deals that one processes per day (like a service business that takes reservations, you could string it out for months) - but it's plausible that a restaurant could be full of groupons for days or weeks following the offer.

For low dollar deals, the business will probably get zero dollars for every Groupon sold or redeemed. (Groupon takes a high percentage of the receipts, 100% for offers under $10). Imagine trying to run a small restaurant for a few weeks with ZERO receipts, as your tables are full of folks with Groupon offers.

Here's one business's experience: Posies Cafe - a bakery / cafe that is probably not too different from my hometown restaurant in terms of scale and economics.

Bottom Line: I have been an East-West customer from Day 1, love their food, and especially their breakfasts. Would hate to see them driven under by a (perhaps foolhardy, and yes most certainly free will) decision to work with Groupon. But if, three or six months down the road, we read about the restaurant closing, I told you so, and I will sorrowfully take my Cassandra-like derriere elsewhere for Thai food.

As for me, I'm not purchasing a Groupon. I'll buy one for a place that I've never been to and would like to try out. But I value local businesses too much; I'll pay full price for my next lunch and consider it a fair trade....

February 20, 2011

Terry

My landline (dually purposed for my business, and usually pretty quiet except for an occasional call from clients thanks to cell phone dominance) has been ringing off the hook the last few weeks. Terry Gerratana, Democratic candidate for CT's 6th Senate seat, has been beating the bushes for votes for the special election this Tuesday, Feb 22nd. I've also gotten 4 or 5 post card mailings from her (compared with 1 from the Republican candidate, Mayor Tim Stewart). Some of the calls have been from campaign workers, but at least one of the messages was from the candidate herself.

I'll probably vote, I'm usually pretty fastidious about civil responsibilities, and I'll vote for Ms. Gerratana assuming I get to the polls. Mostly just in an "I lean to the left" kind of way, although Mayor Stewart's potential double-dipping does not sit well with me - I'd fear he's let his New Britain responsibilities slide if he tried to fill both posts.

Just be happy when Tuesday rolls around so my landline goes back to it's normal state of rest....

February 16, 2011

Oscar Nominated Shorts

Snuck out into the world twice this week - over to Real Art Ways to see the Oscar Nominated Shorts: Live Action and Oscar Nominated Shorts: Animation. Love to have these under my belt going into the CARC Annual Oscar Night event - gives me something to root for!

Not a lot of time to blog, but a sentence or two about each of the films works...

Live Action
The Confession - Just a really dark film. As a young catholic kid often overwhelmed with my own sense of dread and sin, this was pretty horrific. As my friend Cheryl said at the end "I'm going to kill myself now". An amazing film, but oh so very dark.

The Crush - Adorable, although when played after The Confession, some of the concepts were a bit horrific. We feared the worst, but the worst did not occur....

God of Love - Had every potential of being pretentious, but it was funny, cute, and lovable. Neat concept, artful B/W presentation, and interesting actors and location.

Na Wewe - Having recently read read Tracy Kidder's Strength in What Remains, this film was also very dark and scary. But I liked it a lot - brought the imagery and location of Kidder's book to life for me. A little too pat an ending considering the seriousness of the documented encounter.

Wish 143 - Totally smitten by this film. It was really sweet to see a Catholic priest just being a humble and kind servant. The lead actor was great.

I'd say it's a toss-up between God of Love and Wish 143, in my opinion.

Animated

Day and Night - I kind of cringe at the Disney/Pixar shorts (having sat through one too many CARS shorts) - this one was different and slightly interesting, but felt like it could have come right out of the 70's drive in features. Meh.

The Gruffalo - Loved the voices, the animation was whimsical and sweet. Story was OK. Felt a little more corporate / kid centric.

Let's Pollute - I dunno. Sarcasm turned up to 11. Kind of funny animation (nice to see something not CG'd to death). But felt like getting clubbed over the head with a concept.

The Lost Thing - Loved it. Very odd and whimsical, a little tear at the end. Combine Wallace and Grommet with Terry Gilliam.

Madagasgar, Carnet de Voyage - Best in my opinion - a collage of animation styles, sounds, a compelling subject. Made me want to buy a ticket and set off for Africa!