learning again that you get what you pay for
The Groupon works as an assurance contract using ThePoint's platform: if a certain number of people sign up for the offer, then the deal becomes available to all; if the predetermined minimum is not met, no one gets the deal that day. This reduces risk for retailers, who can treat the coupons as quantity discounts as well as sales tools. Groupon makes money by getting a cut of the deal from the retailers
Sounds great, right? Retailers build sales by offering a one-time discount, contingent on quanitty, and consumers get a good deal on some product or service, with Groupon taking a little cut.
Well, as with anything with even trivial complexity, the devil is in the details.
I was overdue for a dental exam, and my insurance doesn't exactly have stellar dental coverage, and i happened to be checking out Groupon when the deal of the day was for $60 exam/cleaning/xrays at a San Francisco dental office.
I bought into the deal, and actually waited about a month before booking my appointment. Well, before trying to book my appointment. When I called the office, I was greated not by the receptionist, but by this pre-recorded message:
The following information applies only to our Groupon.com patients that have not yet scheduled with us but who have already called or emailed our office. We are currently repsonding to Groupon.com user calls and emails in the order in which they were received. If you have already called or emailed to schedule your Groupon.com appointment, we ask that you be patient and please not call or email us again.
That's when I decided to run the numbers, something I probably should have done beforehand:
- 585 Groupons issued
- 10 new patients/week (estimate)
- 58 weeks before I get an appointment
Now I feel like an idiot, and simultaneously realize the brilliance of the Groupon model - they can make interest on the float of non-cashed groupons, which is huge for services that can't be consumed instantaneously. [edit - I'm told that Groupon pays out vendors immediately on the deal, which in theory should mean the vendors can sit on the cash until redeemed]
I have to mention that a simple email to groupon and my money was quickly refunded, so I have no beef with Groupon. The experience made me wonder though: how many vendors would be prepared for the massive Groupon demand spike?
A Quick Look at Some Recent Deals
Here are some of the recent vendors/deals and quantities issued for Groupon:
- Indian Restaurant Discount - 2549
- Admission to a Party - 1650
- Food Festival Entrance - 216
- Spa Session - 1734
- Asian Restaurant Discount - 2111
- Salon Haircut - 833
- Massage - 998
Here are some of the discussions centered around the deals:
I’ve been trying to book an appointment online and it just says “No available times were found” for every date in January and February… Is that just because they are overwhelmed by the number of Groupons purchased?
They made me feel like it was my fault that they had too many people buy this (1700 people) so they just can’t handle the capacity, so they haven’t been able to get back to everyone.
I just called and found their phone number was disconnected, too.
Not all the comments were negative -- for goods/services that are typically provided in high volume, people seemed extremely happy with their Groupon experience. For the time-intensive services, the user response was a bit more spotty.
Again, my experience wasn't great, but getting a refund was no problem whatsoever. It may take a little time for consumers and vendors to flesh out the best way to manage their respective Groupon experiences, but there seems to be a real benefit from getting consumers excited about buying together on the day's deal. So I expect Groupon to be around for a while, continuing to incite mania-induced group purchasing of local goods and services.
As a side note, am I the only person who wonders why a "Collective Action Engine" is necessary to drive the Groupon site? It sounds a lot like business-speak for one line of code saying "don't issue deal until N customers have bought. Maybe I'm missing something.