February 24, 2011

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.


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....

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