The daily deal site Groupon, was all the rage in the retail world just a year ago. It seemed that retailers had found the secret to success. Just give your product or service away, and watch the customers flow through the doors. Once they have seen your amazing offerings they will return again and again to buy stuff you CAN make money on. Why does small business, or any business fall for stuff like this? We talked about Groupon a few times here at this blog, and warned against getting involved with them. Seems these days Groupon is losing staff and money at a fairly good clip. Their stock is down 75% from it's November 2011 IPO and they are losing staff. I don't have a lot of sympathy for Groupon, since they seem to be built on the backs of small businesses who for one reason or another fell under their spell. Usually it's smaller retailers desperate for traffic flow that jump on board with Groupon in the hope that volume somehow trumps profit, or the quality of their offerings. It also assumes that people care only about "cheap'. I think the customers we are looking for don't necessarily feel that way, and don't respond to "price only".
Groupon
Sell me your product at a fair price!
Was sent a link to an article titled "Is Groupon Ruining Retail?". Yes, it's that internet coupon service that is all the rage, and a frequent topic here. My feelings about the service are clear. The person who sent me the link works for a wholesale nursery that is feeling the pinch, as the large wholesale companies dump their product on the box stores and other garden centers. This has the effect of lowering prices to the point there is little or no profit in selling them. While at first blush the customer feels they are reaping the benefit of this, the end result is it is going to force more small and medium sized businesses out of business. Now inflation is rearing it's head. You have seen food and gas prices rising. That cost has to be either passed on to the customer, or absorbed by the business. With the customer already feeling the pinch most businesses are loathe to raise prices, and possibly scare off the customer. So businesses eat the extra cost and and make less money. The problem is most of these businesses are barely hanging on, and the increased costs mean's many will go under. Less choice for the customer.
Now on top of this we have Groupon which only encourages the whole, "price is the only factor" mentality. The customer thinks they are getting a great deal, yet in the long run they are actually contributing to the whole downward spiral that many small businesses find themselves in. The idea that you will attract a few of these coupon shoppers to become loyal customers is just a false hope. I don't buy it, and it seems a lot more businesses are starting to see it that way. The New York Times article is written by a small business owner that tried the service and finds it less that satisfactory. I love the highest rated comment out of 115 comments as of this morning. The commenter says, "I hate coupons. Sell me your product at a fair price to begin with." Bravo!
What does that mean? Sell me your product at a fair price. These coupon deals, massive 50 to 75% off sales, and other gimmicks only encourage the idea that we are somehow making too much money. The average person does not work for themselves. They really have no idea what it cost's to run a business, and therefore assume we are pricing our products at a "unfair" price? Unfair to whom? The cash strapped shopper, or the barely hanging on business? As more people leave the corporate workforce and try their hands at running their own business, this will change.
There is nothing wrong with having a sale or discount offered, but why pay Groupon to do it for you? Offer your loyal, regular customers a special now and then. Let the good word spread through your's and the customers social media efforts. These people are already interested in what you have, and are the ones most likely to spread the word. What a novel, yet simple concept. Offer the customer a fair price regularly for stuff they want. Sure you might not get that rush of people through the door that Groupon would provide, but the people that do come through your door will be more likely to return, and pay a fair price for what you offer. And on top of it you get to stay in business!
Groupon and "OsechiGate"
It's funny how quickly things can turn for a company these days. We have been talking about Groupon, the onlinecoupon service that is "sweeping" the nation, and world. I was unaware it existed outside the U.S., yet a commenter at this blog points us to Japan and "OsechiGate". What is OsechiGate? According to Fast Company.com, "sales for Groupon and other daily deals sites in Japan are hurting following an incident we'll call 'OsechiGate'--a bad food deal involving osechi, a decadent Japanese New Year's dish. Despite Groupon founder Andrew Mason's video apology to the people of Japan a few weeks ago, Groupon sales dropped 14% over the last month, according to Coupon-Jp(PDF), a consumer research firm in Japan." Follow this link to see what was offered through the Groupon, and what was actually delivered. Why doesn't this surprise me? The Fasctcompany.com article even tries to see the light at the end of the tunnel with, "some pundits thought the event might actually be a publicity boon for Groupon, under the any-press-is-good-press theory, says SocialTimes. But Coupon-jp's report suggests otherwise. Even Groupon clones have been hurting in the wake of the incident."
I have had some tell me that in the right circumstance Groupon is useful for small garden centers. Moving merchandise that isn't selling as fast as they like, end of the season stuff, discontinued items, etc. I'll stick with what we said before about Groupon. If you want to be associated with the type of merchandising that took place in Japan or what happened recently with FTD on Valentines day then by all means use Groupon. Some will say that the quick apology from Groupon's founder after each event shows Groupon get's it when it comes to companies admitting mistakes. Well how often are we going to be hearing apologies about deals gone wrong?
When this kind of stuff happens people start to wonder where to go if everyone is trying to rip you off. According to some, retailers are basically crooks that mark their stuff up only to turn around and put it on sale, and still make a profit. With that kind of publicity what's a small business to do? Many businesses are scared and feel the only way to be noticed is through these coupon deals. Instead try connecting with your customers! Quit listening to the social media experts and PR people who tell us that Groupon or paid Tweets are the way to gain fans. We want to shop at stores where we know the people running the store, and trust them. The only way to gain those kind of fans is through honesty in advertising. Sure there are plenty of people who love Groupon and sites like that, and there are also plenty of people who like to shop at the box stores. Sometimes trying to change their minds is just not worth it. Better to focus on people who's values and needs more closely align with ours. Let those people spread the word to their friends. That's social media in a nutshell.