29 October 2010

Groupon: sucky, or no?

I have been subscribing to Groupon now for about two months, though I generally just watch the deals pass me by; I live about an hour away from the city housing Groupon’s mad deals, so it has to be pretty interesting to be worth the drive.  I did, however, break down and purchase one for an Italian bistro in LoDo, anticipating that we might someday be in the neighborhood for another reason and could use a bite to eat. 

Specializing in discounts for local restaurants, spas, and other merchants, the company promises “one ridiculously huge coupon each day, on the best things to eat, see, do and buy in your city.”  Launched in 2008, it actually grew out of a website called The Point, a website that lets you start a campaign asking people to give money or do something as a group once a "tipping point" of people agree to participate.  

Groupon further claims that they “came up with the patent-pending idea for Groupon as an antidote to a common ailment for us city-dwellers: there's so much cool stuff to do, but the choice can be overwhelming. With so many options, sometimes the easiest thing is to go to a familiar restaurant, or just stay at home and watch a movie. As a result, we miss out on trying all the cool things our cities have to offer. By focusing on one good or service each day, Groupon makes it simple. And by leveraging The Point's framework for collective buying, Groupon is able to offer deals that make it very difficult to say no.” (Does that last part sound a little creepy or is it just me?)

It’s a nice idea to encourage people to be tourists in their own cities (I’ve had that same philosophy for years), but is it really an antidote for a Prufrockian lack of confidence in your ability to choose a restaurant, or is it just a way to ban together and be cheapskates?  (For me, it’s the “cheapskate” one.)

I got a pretty sweet deal : I paid $10 for $20 worth of food and, because it was only lunch, and because my husband and I are cheap, we only ended up paying an extra $2 out-of-pocket to complete the transaction.  The wait staff was perfectly friendly about using a Groupon and there didn’t seem to be any problems, but for some reason I felt a little slimy doing it.  I wondered if it turned out to be an OK deal for them, and felt compelled to tip rather generously on the full amount of our meals to assuage my Irish guilt that they might be getting screwed.  I mean, if a deal (in this case, $12 + tip for two generous lunches and cappuccinos in a posh Denver neighborhood) seems too good to be true, it probably is.  But I certainly wasn’t getting hurt from my end, so I wondered who was feeling the pinch. 

Sure enough, my instincts were right—Groupon seems to be a pretty bad deal, at least for restaurants.   Some initial research has already been done on the phenomenon 
and it seems that service-based industries fair better. But restaurants are suffering from poor tipping, pressure to give deeper discounts than they want to give (“very difficult to say no”—kind of menacing, isn’t it?),  and some pretty high overhead costs (food, paying servers, rent, utilities…), making it difficult for them to recoup their losses from the Groupons presented.  And if you follow along, it’s the small, local businesses that are dealing with Groupons.  Never once have I seen an Applebee’s, Wal-Mart, or other national chain use them—they don’t need the advertising.  So if Groupon hurts the business owners, it’s the neighborhood businesses, the ones we should be most interested in supporting, that are suffering. 

Participating in Groupon is sold to businesses as a great way to market your restaurant or store, and it certainly made me aware of a new watering hole I didn’t know about.  But, in my case, I am not very likely to go back because I don’t live nearby; I was willing to try it and go a little out of my way because I had this great coupon for the place.  And even if I did live nearby, there’s nothing compelling me to return and pay full price.  While our sandwiches and coffee were good, I can easily make those things at home, and for $12 each for lunch, this bistro doesn’t seem nearly as special as it did at 50% off.  I wonder how many people are in the same boat as me?  Does Groupon foster the expansion of a business’s loyal customer base, or just bring one-timers in because they love a deal?    

The early research done on this phenomenon does offer some suggestions for making Groupon work better for long-term profits, like spreading the coupon out over multiple visits, but that doesn’t sound like as good of a deal to me, and I would be less likely to bite if I had to make a longer-term commitment to using my coupon.  The beauty of Groupon, for the consumer, is that you can try something new with no strings attached, and if it sucks, you really didn’t pay that much for the experience.  But even if it was great, why go back and pay full price when you can just wait for the next Groupon to come around and send you to another new restaurant? 
Like purchasing responsibly made goods, it might be worth a few extra bucks to just say “no” to Groupons and give the businesses you care about what they need to survive.  For a compelling argument against using this company, read this first-hand testimonial from a “Mom-andPop” coffee shop in Portland.  It convinced me.