My Brief Stint as a Groupon User

learning again that you get what you pay for

Groupon

For those that are unfamiliar, Groupon is a collective buying site, similar to Woot and BuyWithMe. Borrowing from the Wikipedia entry:

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.

My Experience

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.

Great! Right?

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.

Concluding Notes

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.

5 responses

Seems like there should be a maximum number of groupons as well as a minimum. Of course, that means the service vendors have to think ahead and realize they cannot possibly process thousands of new customers in any reasonable amount of time. :)

— nlfiedler

There is a max that a business can set. I set mine for 300 as a single practitioner massage business, which was reasonable for my current volume at the time. 10 new patients a week is also reasonable, but that's not the flow of how people use the vouchers - they load the bookends of the term of the promotion. I'm now slammed in the last month of the promotion and don't have any openings. When I started the promotion I went 4 months being able to fit only a few full paying clients a week.

As for sitting around collecting unused Groupons - believe me, the businesses that do Groupon deals are not getting rich in the long run, unless their profit exceeds 75% of their price. That dentist you were trying to book with probably got the standard 50% of the voucher, which would mean that 585 people potentially got an exam, cleaning and xray for $30 - so the beginning months and the ending months of the promotion, if flooded with Groupon customers and no full paying people, could crush a business if it's small enough.

I found benefit and a great learning experience from Groupon, but I will never do it again. And as for the people who waited a year to try to schedule with me and now can't get in before the promotion end - That's really too bad, but your experience with Groupon, the multi-million dollar corporation that made $17,775 off that dentist for spending a few hours crafting an ad and spamming it to their email list and web page, gives me confidence that those people will receive refunds.

— neevita

Thanks for the comment @neevita - it remains to be seen whether the Groupon model is a net positive for all small businesses. I think the jury is still out on whether these deals generate repeat customers, or whether the deals make sense when there isn't an up-sell opportunity (like free appetizers at a restaurant) It was interesting to hear your experience with the volume limit as an independent practitioner.

— kevin lochner

Groupon hold payments from vendors LONG after the payment is due. After taking 50% off the top + 2.5% for credit card processing, they then are SUPPOSED to pay the vendor in 3 payments-Good luck with that!!! We've been waiting for our final payment due, which is now 1 MONTH overdue! Every day, it's a new excuse....and lies. They sent the check, they FedExed it overnight, but don't have a tracking number! Fedex ALWAYS has a tracking number- IF a package is actually sent. Lies, lies, lies!! One lie after the other. Apparently accounting dept. is outsourced, but they should STILL pay their vendors. It's been a NIGHTMARE dealing with all of the incompetents @ Groupon. HORRIBLE deceitful company!

— eeerrrcom

yikes, good luck with that payment