Jessie Burke, the owner of a cafe in Portland says a successful Groupon cost her business $8,000. It might not sound like a lot of money, but for her it was devastating.
Burke said she had to withdraw money from her personal savings just to cover payroll for the month after losing the money.
How did it happen? A Groupon sales rep suggested to her she offer a $6 Groupon for $13 worth of product, with Groupon keeping 50% of the revenue from sales of the Groupon.
(Burke says Groupon told her it takes 100% of sales under $10, but she refused. Groupon chief Andrew Mason says that’s “100% false.”)
Groupon wouldn’t let Burke cap the amount of Groupons sold, which led to Groupon selling 1,000 deals, which led to too many discounts. She ended up losing money, and having an overall lousy experience.
This shouldn’t be read as the definitive Groupon experience for a small business, but it’s something to keep in mind if you are considering signing up. Read her full account here.
Groupon boss Andrew Mason left a response to Burke on her blog, but it doesn’t look it’s shown up yet. Here’s his response:
This is Andrew Mason, Founder/CEO of Groupon. As painful as it was to read your story, I’m really glad you shared it – this gives us an opportunity to learn and improve. We’ve run deals for hundreds of businesses similar to yours and they’ve had great experiences, so I’m eager to understand what it is about your business that made Groupon such a bust. If I don’t get in touch with you first, please email me at [email protected]
For what it’s worth, there’s nothing more important to me than making sure Groupon is helping everyone it touches – our customers, our merchant partners, and our employees. We take a lot of pride in the fact that 97% of our merchants want to be featured on Groupon again – a far higher satisfaction rate than any other form of local advertising – not that we’ll be satisfied until that number reaches 100%. I know that sounds like typical corporate-speak, but I hope we follow up with actions that prove it true. When we first heard concerns from businesses that had **too many** customers from Groupon, we responded by providing merchants with Groupon preparation materials, like this: http://www.groupon.com/pages/merchant-welcome and like this video we received with a Groupon customer that sold 10,000 bagel Groupons in one day: http://www.youtube.com/watch?v=I0G58hZoK6E
Also, for what it’s worth, it’s company policy to never prevent merchants from capping their deals. If a merchant sells too many Groupons, they have a bad experience, the customer has a bad experience, and therefore, Groupon loses. We’re longer term thinkers than that. In fact, we have the opposite problem more often – where merchants contest a cap we recommend, convinced they can handle more customers than we think.
Again, I’m so sorry about your experience – stay tuned, we’ll be in touch to make things right.