
Why All The Daily Deal Hate? - rottencupcakes
http://techcrunch.com/2011/06/14/why-daily-deal-hate/
======
joeguilmette
I ran a small business and ran a ton of Groupons. We are on track for another
record breaking year thanks to Groupon. Like anything with small business, you
can take the good with the bad and mitigate risk, or you can just crash and
burn by making poor choices.

Groupon is amazing, and not very cheap marketing that WORKS, unlike a lot of
other not very cheap marketing that does not work. And we sold a LOT of
Groupons. Some days 80% of customers are Groupons. When you get 2x your normal
business walking through the door it's kind of hard not to make money. Cross
sales, up sales, post-experience contact, word of mouth... It's not as easy as
just setting up a Groupon and watching money roll in, you have to think about
it and work hard to turn it into a positive experience.

But then again, this is business, right? Who said it was going to be a safe,
easy bet? Groupon is just another way to market your business.

And it happens to be very consistent and effective.

~~~
sosuke
Please do a write up on your experience, the more details the better. Your
results sound great compared to what we've been hearing about recently and I'm
certain HN would like to hear your story.

~~~
joeguilmette
<http://news.ycombinator.com/item?id=2654788>

here you go :)

~~~
clobber
So, skydiving.

This is interesting but I'd say you're in the minority compared to most
businesses that try Groupon (like restaurants, cafes) and have high fixed
costs and slim margins.

Thanks for the write up though.

~~~
wisty
Restaurants pay about 40% for food. The rest is payroll, rent, etc. In total,
they make about 4%, but they lose money hand over fist if the restaurant is
empty.

Also, that margin is very rubbery, depending on the dish. They might make a
pasta dish for 20% of the cost, and a steak for 70% of the cost.

Also, drinks can have crazy mark-ups.

If the groupon is limited to high-margin meals, then they won't lose money.
And they might make a profit on the drinks, or people who change their mind
and go for a full price dish.

And they might get some repeat business. Also, it looks good for them to look
full - passers-by might assume that the restaurant is packed because it's a
good one.

The thing is, owners have to be very careful about the deal they give. Groupon
seems a little unpredictable (for non-experts), so it can be very dangerous.

Of course, all marketing has its costs. And restaurants and cafes rarely rely
on marketing (fast food excepted).

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potatolicious
Here's the flip side (i.e., not from the perspective of participating
businesses) - I hate daily deals because, as a customer, they are _almost
never relevant_.

It's like signing up for a crappy mailing list full of spam in the hopes that
once in a blue moon something useful would show up. Except, the signal to
noise ratio is so poor you only ever find out about the really good deals
after the fact.

If I didn't want a spa Groupon yesterday, I sure as hell don't want one today.
I don't _want_ your stupid emails clogging up my Inbox - if they were smarter
about it they'd get something in my news feeds - so I can just briefly glance
at it and go on with my day, instead of deleting all of these emails.

If Groupon had actually a variety of deals of interest to me (or anyone I
know, really), then it might be a compelling proposition to me as a consumer.
But as it is it's just a bunch of crap that few people want (or a ludicrous
overload of things people want).

~~~
redwood
The truth is many customers (oddly) will buy something just because it's
discounted! This is how sales can generate sales and compel people to buy non-
relevant stuff.

Those of us who recognize that we're spending in net more irrespective of
getting good deals shy away but there's always been the coupon-crazed folks
out there who've never understood this logic. It's the same logic that propels
Costco to sell you way more than what you need.

I suspect you don't use coupons or shop at Costco, but many do :) This makes
me, while extremely anti-daily-deal-sites, begrudgingly acknowledge that they
do have at least some viability. (note that "some" does not necessarily mean
the valuations they've been receiving...)

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edw
This article eerily parallels a conversation I was having just last night
about Groupon and Square: Groupon's a bunch of bottom-dwelling parasites
whereas Square has already done so much to make it easier to accept credit
cards, and their products are poised to add more and more value for small
businesses.

I remember the first time I walked into an Apple Store after the iPhone had
been released. Apple employees were using Win CE based handhelds with Symbol
barcode scanners. It struck me as odd — and as something that was going to
change. And when Apple figured out how to do it for themselves, with the
iPhones or later the iPod Touch or iPad, then someone, maybe Apple, maybe
someone else, would figure out how to make something that seemed like science
fiction — employees able to check you out while you stood there, without going
to a cash register — into something that _anyone_ could do. It might only be
90% as good, but it probably only cost 10% of what those specialized Symbol
devices cost.

Square has become that thing. I would have thought Intuit would've gotten
there first. PayPal might have gotten their first. Or VeriPhone. All of them
_should_ have gotten there first, but I think there were probably huge
Innovator's Dilemma style cannibalization and ego issues at work.

In the end Square was the company. I think these guys, as the author does, are
the good guys. They're earning their keep. The people who work there are
entitled to be proud of themselves, because they are very much poised to do
_very_ well by doing good.

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9999
"I’m tired of seeing small businesses get screwed."

I really don't understand this as a rationalization for the somewhat skewed
portrayal of Groupon that this guy has been giving. I'm sure some small
businesses have been screwed by choosing to do a poorly thought out Groupon.
Groupon's business plan does not rely on them screwing over small businesses,
in fact, they're heavily reliant on small businesses having a positive
experience with the company. From all of the stories I've seen, it seems like
there have been some nasty Groupon sales guys that may have took advantage of
a small business owner, but it seems like Groupon is not encouraging that
behavior in the long term. It's obviously not in their best business interests
to do so, and Andrew Mason, being neither a fool nor a monster would not allow
the business to lose sight of its longer term goals. Also, the fact that he
took a very low payout tells me that he may be in it for the long haul.

~~~
mgkimsal
What's a little bit hard to swallow is seeing a company _get big_ by employing
those tactics, and the penalty is "well, we had a few bad apples, and we're
disciplining them now".

Whether right or wrong, all we heard about for a while from real users was the
horror stories, giving the impression that most deals were bad for the small
businesses using them. My gut reaction is "sure, _I_ could make money hand
over fist by lying (or misrepresenting things) to customers - making money by
being honest is much harder".

In some ways it's a bit like the old MS stories. "They just did good
business!". Well, no, they quickly established a monopoly then proceeded to
abuse the hell out of it with several partners, which kept them entrenched and
on top far longer than they would otherwise have been there.

"Hey they don't do that anymore!" That may be true, but the damage is done,
and they get to reap the rewards for a long time with relatively minor
punishments.

There'd be much more expense in doing long term education and one-on-one
counseling with the small businesses that use groupon, and probably a MUCH
higher satisfaction rate with them from a merchant standpoint, but they
wouldn't have nearly the marketshare they do by going that route.

------
bruce511
There seems to be something of a disconnect between the tech community and
everyone else when it comes to Groupon. Investors clearly love it, it seems
plenty of businesses are using it, and equally gazillions of people are buying
them. I suspect, popular HN stories to the contrary, they'll successfully IPO
later and won't collapse as fast as some hope.

Sure it's not for all businesses, and some will have a bad experience. Some
business owners can't do math - some just aren't well suited to a group on
model. Does that invalidate the whole company? I think not.

Sure, as a Groupon buyer you'll get plenty of deal offers for stuff you're not
interested in. Well duh! I'm guessing that's been the case since day 1 anyway
and it seems to be working regardless.

So why all the hate on tech blogs and commentaries? Might it be just a little
bit of sour grapes? After all Groupon raised over a billion in capital (so if
_I_ can't get a lousy million for my idea, what does that make me?) Worse most
of the billion was not so much capital raised as a straight share sale. The
reaction to other VC spends lately (notably the 40 million for Color) seems to
fuel my hypothesis that most techies hate the success of others. They're
playing this as some sort of zero-sum game.

It's also hard to get excited about someone else's success when it seems like
such a simple idea. After all anyone can enter the same space - the barrier to
entry is low (as plenty of clones will attest to.) But while clones always
exist there is only one eBay, one Amazon, one Facebook, one Twitter. I suspect
there will be one Groupon. As with most of these things, they're simple ideas,
but require a lot of traction and good implementation to do well.

I say good for you Groupon. I say, let the seller of Groupons do the math
before doing business, and let the buyers take advantage of what appeals to
them. And maybe, just maybe, us techie folk could stand up once in a while,
and say "well done" without begrudging them their success.

Of course Groupon might fail. Of course their IPO might suck. That can happen
to any company. But we're acting like spoilt children, stamping our feet and
complaining that life is unfair.

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dlitwak
companies pay millions of dollars for a spot in the superbowl to reach
customers and they aren't able to quantify them, and obviously million dollar
spots on tv aren't for every business. But, like Groupon, that isn't to say
they don't benefit businesses that use them right. And it can be used as a way
to build awareness. Maybe the restaurants and coffee shops that offered
groupons didn't get anything out of it because their patrons didn't like the
product enough to come back when there wasn't a discount. I don't think
restaurants/coffee shops are inherently bad targets, you can be prompted to
try someplace new and become a regular if the food is any good. Seems like bad
decision making on the part of the business owner.

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cachemoney
It drives pageviews?

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clobber
His first sentence really sums it all up:

"I’m tired of seeing small businesses get screwed."

