Haha. It's impossible to hate on Groupon when Andrew Mason writes so well and so sincerely. Good luck haters. That's a good blog response.
There have been a handful of stories lately documenting the struggles of cupcake
shops running out of batter or sushi restaurants who don’t have enough rice to
meet the demand brought on by their Groupon feature.
I didn't read that as sarcastic or condescending, but maybe it's because I already spent time watching all the Groupon site videos? There vibe is pretty friendly, lighthearted, and helpful - I bet there actually was a cupcake place that ran out as a notable experience, and that's why they write about it.
> he problem is not so much that they can't satisfy the demand (though there is some of that in some cases) but that it's a cost sink that didn't generate the promised increase in "regular" customers.
This is true, yes. I think a business owner should look at their desired customer base - the bagel shop it's a great play, because everyone buys quick food, and maybe Groupon users can shift to buying their bagels. For a slightly formal upscale cafe like Posies, you're trying to capture people's "sit down at an expensive environment" [1] time, which seems like it wouldn't convert as well long term. Groupon users might do it once for the experience, but people generally budget much less time and money for formal relaxing experiences, so you'd have a harder time displacing it.
[1] http://posiescafe.com/wp/?page_id=76 - Their coffee is compares reasonably to Starbucks at $2 to $3 a cup, their sandwiches around $9... they've got wines and beers from $3 to $7 per glass. I think this puts them in a tough spot where they're both upmarket/a slight luxury in most people's eyes, but still don't have crazy profit margins like an ultra-premium place.
My analysis:
I think Groupon is good for businesses that do high volume that want to replace people's regular common routine (a sandwich, hot dog, drink, whatever), low cost businesses that the Groupon demographic would keep using (inexpensive nail salons), and for places with no marginal cost (Chelsea Piers for instance, museums, other places where all the expenses are operating the place and there's no significant space constraints). I think slightly upmarket, not quick places would be one of the worst performers in Groupon if they couldn't at least break even on the Groupons.
The thing that gets me is when he says "If they have a great business, we’re the best amplifier out there." Every small business owner thinks they've got a great business! I'm sure their number one sales tactic is to exploit people's vanity, which may be perfectly legal, but it's a still pretty messed up thing to do.
And then he says "But we used to be all about helping people raise money for charity, we're good guys!" Yeah, but now you're pocketing other people's money, I guess things change.
If I were a small business owner looking to use GroupOn I wouldn't feel comforted by this response in the least.
Seeing as she negotiated the terms down from Groupon taking 100% commission to 50%, I don't think the Groupon rep could have had an inkling that the woman was the type to be taken advantage of in the manner you're describing.
> And it is unfortunate that our national character has changed to the point where we lionize people who became rich selling shady financial instruments, and pushing bad loans.
Lets not stray into the melodramatic shall we? ... its a step too far to equate Groupon with people pushing bad loans. In 95% of cases or so, the businesses benefit greatly from doing business with Groupon ... they weren't uniformly getting screwed over like case of the punks selling Mortgage Backed Securities and Subprime Mortgage loans.
Still, a partner that drives you out of business is not good to have. This is not good for groupon, they should have done things better, made sure that the owner could afford the deal for one. If margins are that thin, maybe they should be looking at not such a good deal, or no deal at all.
What do you suggest they should have done differently? Should they have filed her Taxes for her, balanced her books and determined her cashflow before turning her down. Maybe then she would only have written a blog post about how the Groupon people were a bunch of elitist asshats that wouldn't do business with her instead?
> If margins are that thin, maybe they should be looking at not such a good deal, or no deal at all.
I'm sorry but this is arrant nonsense. What is she .... five? She's a business owner for goodness sake ... if she couldn't do the math and see that it wouldn't be beneficial to her business to do a deal with Groupon then how is it Groupon's fault?
A partner may understand my business and be in a position to help me improve it. A vendor is not. When I buy yellow pages ads, AdWords, or direct mail postcards, I don't expect my supplier to give me advice on my business. Why should Posie's expect Groupon to give them financial advice?
Its clear from the writing that she didn't know what she was getting into when she struck a deal, she set her deal at a price point that she could not possibly sustain (against the advice of her husband/business partner) and never once contacted Groupon for help with the situation.
What was Groupon supposed to do? Read her mind?
To be fair, I'm sure going forward Groupon can put up big bright red signs warning sellers that they will send them a ton of customers (the horror!) and that they'd better plan to appropriately deal with it or pick a price point that they can sustain, but the implication in your post that Groupon is somehow at fault for the situation makes steam come out my ears.
edit: looks like they already have something like this for sellers "We responded to those concerns by creating merchant preparation materials, including this video featuring a Groupon merchant who sold 10,000 bagel Groupons in a day:"