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Comment by phereford | Hacker News Reader

Disclaimer: I work for a sustainable deal site for local businesses.

One factor that hbr is not mentioning is business owners (national and local) that participate on Groupon, for the most part, are having bad experiences. Obviously this depends on the industry (sky dive plus all around, coffee shops down all around) but not all industries can live off of 25% of their goods sold. I know many local business owners who ran a Groupon and promised themselves that they will never Groupon again because of the poor customer experience, and the large financial loss per Groupon.

The scale part is what worries me. I don't think Amazon needed as much money as Groupon needed to scale which is the biggest worry. At some point, the financial well will dry up on Groupon.

When that happens, I don't know what will become of Groupon. Maybe they should have taken the purported Google deal of a buyout for $6 billion :).

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> business owners (national and local) that participate on Groupon, for the most part, are having bad experiences

My understanding is that Groupon's satisfaction rate is well above 50%. It seems that everyone forgets that, at worst, this is an advertising expense that guarantees revenue and foot traffic.

It is 100% dependant on industry. Ask any retailer if a Groupon makes sense when they depend on the margins their products produce.

The only way it makes sense is if they are able to get large volume discounts on whatever they are trying to sell.

Just running some #s here. Local clothing ship buys jewelry for $5/piece and marks it up to $15. Groupon takes 75% of the $15. Groupon takes $11.25 out of the $15 and you just lost $.25 on the entire deal (not including expenses to find that piece).

Sure that same retailer could mark the piece up to $20 but groupon takes $15 of that and you break even. A $5 piece probably couldnt be sold for anything higher than $20...

I will agree that it generates foot traffic but most smaller businesses I have talked to who have done a Groupon or thought about it have had negative experiences or choose not to do it because of a scenario similar to the one above I portrayed.

Just my .02

25 cents to get someone through the door is the best deal on the planet.

It really depends on who that 'someone' is.

A tire-kicker who has no intention of ever becoming a customer in the future, and just wants their 'deal' - no one wants those customers. Groupon doesn't seem to offer any way to segment or market your message/deal to subsets of people differentiated on any other signal besides those customers that "want a deal".

At $0.25 per, it really does not matter. Even at higher costs, the customer mix would need to be pretty horrible to compete unfavorably with traditional advertising where you very well might get zero custo,ers for your outlay.

In the example given, it's really $1.25, but even at $0.25, I'd still disagree. That's just the cost of getting someone in the door. If your sales process is just people browsing in a physical location, possibly that's OK. If it requires a lot of interaction with staff, that's cost that needs to be factored in.

Should that be factored in to the groupon price? Absolutely. Will most people know to do that (and goes groupon counsel people on how to do that)? Based on most groupon horror stories, absolutely not.

Those horror stories are actually somewhat scary for a business owner. Not being able to dictate what time your discount starts?

If people have a bad experience with the Groupon at your store, the store gets inflicted with tons of bad reviews due to long lines, long checkout times, etc etc etc. While in theory this sounds like a good problem to have, its not and won't provide a sustainable stream of customers (i.e. majority of these customers come once, have an awful experience because of the aforementioned problems and never come back).

While my sample size is small (~15 biz owners) I saw it first hand at a restaurant in Somerville. My buddies and I stayed for 3 table turns around us. I overheard everyone that was there because of Groupon and every single table had no intention of coming back. They didn't mention the cause, but I am assuming it was slow service because the place had a 1.5 hr wait (normally 15mins).

25 cents on top of 50 cents.

You have to take into consideration the discount they are required to give as well.

If you don't mind me asking, who do you work for and what makes the deal site sustainable for local businesses?

Sustainable means it doesn't hinder the business like a 50% off coupon and a 25% split on the revenue thereafter.

Most local businesses cant afford that and realize it too late.

The company I work for is thegolocalcard.com (won't plug it again on Hacker News...I promise).

How funny! I love golocal in Austin! You guys rock, really great company and concept. I like to use mine at Quacks.

Haha! Money! I am developing an iPhone app for them and helping start GoLocal in Boston :).

The GoLocal Austin people are awesome and a half :)

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