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It's all the rage.

Shop.org is featuring their president at their summit at the end of the month.

The first national brand campaign with GAP reportedly sold 445,000 vouchers and received $11 million in revenue.

Everyone's saying, "Come to the party the Groupons fine."

Retailers should beware. This phenomenon will deflate prices and commoditize the industry like none before.

With their "deal of the day" emailed to millions, Groupon and their imitators  are usurping your brand, your message and all for their gain.

Anyone who doesn't see this is blind.

Doubt me?

Think of the last time you received flowers.  Do you remember who gave them to you or the florist? 

Exactly, the person who gave them to you. 

The person that gives them the flowers is Groupon, you are the forgotten florist

I wrote an 11-part series on the subject with case studies. You can view the summation at http://www.retaildoc.com/blog/final-coupon-groupon-small-business/

As the holidays approach, it will be interesting to see which brand next takes the legacy of the people who built it and reduces it to a commodity or gives the impression their prices were always high and with the discount became "fair."

Retailers participating in such online coupon programs are fueling a coupon-driven, price-obsessed, dirt-scratcher mentality that will be unsustainable for all.

When the profits are freely given away in some misguided "trial" mindset, the brand won't falter immediately but make no mistake, it will falter.  

Its as much an admission of defeat, "we have nothing else to offer" to the customer.

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User Comments – Give us your opinion!
  • Bill Emerson
    112732741
    I.m a little puzzled by the point of view. If the companies that used Groupon did no promotional activity, then it would certainly be a valid point. Each of the companies that I've seen use Groupon, however, all have their own promotional calendars, deals, price breaks and so on. The only difference is that they are using a highly efficient delivery mechanism with a much larger incremental reach than their own lists.
  • Stephen Van de Castle
    112731556
    Goupon does not work for every retailer. My wife's business is high end, high service, and the price points tend to be high (my opinion), but no higher than competitors. What is the difference? Her staff and service policies, in place for many years. The clients who frequent her business ARE NOT seeking a deal. Unless they happen to be a new client, the VALUE has been established, and maintained, for years. If the only benefit one derives from a "coupon" is a lower price for the customer, and lower profiability for the retailer, God help us all. If "price" is the only thing you're selling, you already have tremendous competition. If you're unable to illustrate, and demonstrate, consistantly, your VALUE, you've placed yourself in a hole, not Groupon. Stop digging. Add value. Demonstrate the value. Charge for it. Repeat. Stephen Van de Castle
  • Sydney Barrows
    112729768
    As an avid Groupon user I'm dismayed to read this piece. While it's true that I haven't always gone back to restaurants (that's mostly what I use it for) I've used a Groupon for, nine times out of ten I never would have gone to that restaurant in the first place, and it was nice to try places I normally wouldn't. And we always spend more than we would have had we not had the Groupon.

    I must disagree with your analogy about the flowers. While the Groupon will cost the buyer less, the flowers still come from a specific florist shop and were sent by a specific person. I don't know where you came up with idea.

    And just like gift certificates, not everyone cashes them in, so the retailer gets to keep the money anyway. I understand the point you're trying to make, but I respectfully believe you are barking up the wrong tree.
  • Kevin Burns
    112724428
    Groupon is simply a conduit, even to brand advocates. In today's retail business it's all about finance, free cash flow. Today's customer world is all about economics. Do Gap customers welcome the savings as much as the Gap welcomes the cash flow and traffic? Probably so.

    I'm also positive that people will remember where they bought the "jeans", and equally confident that the "jeans" say Gap on the back.

    Firms benefit from selling "value meals" and generating traffic through price-impact initiatives ... especially at a time when retail is sluggish and consumers are cautiously saving more of their diposable income. It appears that the Gap understands the times, their customers and the public perfectly.

    The premise of an intentional 50% off sales event being strategic surrender is sensationalism. These events are so common that most shoppers "save by accident" many times a year.
  • Robert Jacobson
    112716002
    The old saw about never letting someone come between you and your customers was never more relevant -- but hasn't the Internet, not to mention Costco and Sam's Club -- basically insinuated a middle man regardless? The cow is out of the barn. The other side of it is that by having their products produced or sourced in a hundred nameless overseas countries, what's a brand, anyway? Just a clever trademark stuck on a computer from China, shoes from India, meat from Argentina, and games from Japan. Retailers' greed got the better of them some time ago. Quality was sacrificed for cheap COS. GROUPON is a logical consequence.
  • Mike Diliberto
    112650274
    I believe that the perspective that we have depends upon our motivations for utilizing a Groupon, as a store owner. Several of the previous comments have illustrated the perspective of Groupon as a marketing vehicle as well as a cash flow vehicle.

    Few could doubt the effectiveness of Groupon as a vehicle for delivering free cash flow. Although it is discounted, any first year finance major can discuss with you the tradeoff of taking discounted cash flow up front in lieu of incremental payments over time. To use the GAP example, once we subtract Groupon's cut from the $11M, we see that GAP traded ~$6M in free cash flow up front in lieu of $22M in incremental payments, a discount of $16 Million Dollars. Was that worth it to them? Maybe. For me, that kind of discount could sink my business. There are other questions in my mind, especially whether Groupon users spend over the face value of their Groupons in the same way that retail customers overspend related to their gift cards.

    On the other hand, looking at Groupon as a marketing vehicle, I have to wonder, as several other comments do, if those customers will come back again. If I "buy their business" via a groupon, will I make it up the next time, or will those people never come back? Anecdotal evidence seems to indicate that many Groupon redeemers are not likely to become repeat customers, and so this makes me question the value of Groupon as a marketing method.
  • Brad Einarsen
    110568946
    The content of the article is good, the tone is a bit alarmist.

    Groupon and the others (Teambuy.ca etc.) are an intermediated version of Tuángòu (group buying) phenomena in China (source: wikipedia).

    In that sense they are not new.

    What is new is the velocity and volume of the offers, and the convenience for consumers. Why would I ever pay full price for a service that comes on Groupon or Teambuy once a month direct to my inbox? These services don't compete, they compliment one another. As a consumer I'm happy to have five different accounts if it means I can save 50% off of products and services I want.

    The concept is not the problem, but merchants need to be wary of how much competition happens on these services or there will be a race "below the bottom" for prices.
  • Joan Tago
    108175996
    Thanks for the caution! However, I still believe that GroupOn is still a trustworthy website for daily deals. GroupBuyUnited.com even listed daily deals from GroupOn and other dependable deal sites. :-)
  • john ryan
    97837514
    Marketing strategy. Groupon, the deep discount coupon site with more than sixty million subscribers, has been a boon to shoppers who go wherever Groupon's 50 to 90 percent off coupons lead them. I found this here: Does Groupon hurt small business High-margin businesses have also benefited handsomely from the increased patronage. But the other side of the coin might not be quite as shiny, writes Klein for Bloomberg Businessweek. Smaller businesses may actually be losing money when they reach out to promote through sites like Groupon, LivingSocial and BuyWithMe.
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the Retail Doctor

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Bob Phibbs
Bob Phibbs, the Retail Doctor, is a popular motivational speaker and small business Consultant who has transformed thousands of businesses throughout the world with his straightforward, proven advice. His success at making over businesses has been featured on PBS Life & Times, in the Los Angeles Times, Entrepreneur magazine, and the New York Times.
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