The stories are all pretty much the same: business owners sign up for a deal that would lose them money in the hopes of upselling and bringing customers back for full price purchasers. Instead, they find themselves overwhelmed by swarms of rude bargain hunters who crowd out full-price customers, refuse to spend anything beyond the face value of the coupon, and are never seen again.
A study out of Rice University has added some fuel to the fire, finding that 42% of businesses that have run Groupons wouldn’t do so again, and concluding that there is reason to doubt “the sustainability of social promotions as they currently exist.”
Don’t hold your breath.
Some businesses are definitely getting creamed by Groupons, but that isn’t a problem with the Groupon model, it’s a problem with how they’re using it.
Two-thirds of the businesses in the study reported making a profit off of their offers. The lesson for the other third isn’t that Groupon is broken, it’s that they did a below average job putting together an offer.
Groupon is a business. If you offer up a massive discount that its users will love, and that will absolutely destroy you, it will happily accept. But that doesn’t mean Groupon is bad for businesses. It just means you’re doing it wrong.