The Writing on the Wall, Part Two

Sharing such a personal story was not easy for me, but I’m delighted and deeply touched by the positive response. Emboldened by that experience, I’d like to continue this writerly tangent, now with something drastically different from my typical content: A persuasive research essay. Groupon seems to have reached its breaking point since the time of the original writing, but it still flounders along, so I feel there are a few things remaining that must be said. Tell me, do you still buy Groupons or other similar online discounts? After reading the piece, was I able to persuade you otherwise?

Disastrous Discounts: Paying the Price for Groupon

Social purchasing is more popular than ever, and new websites offering deep discounts on services ranging from massages to kayaking classes are sprouting up every day. Groupon was arguably the trendsetter, beginning the craze and still drawing the greatest crowds; more than 50 million people subscribe to regular alerts and emails about current deals, and over 22 million Groupon deals have been sold as of January 2011. Most commonly though, the bulk of these prepaid vouchers are for purchasing food in restaurants. Poised as both a painless way to try new cuisines and a money-saving option for revisiting old favorites, it’s easy to see the allure of up to 70% off your receipt’s total. The deals may be booming, but what discount-seeking consumers may not know is that by buying into this trendy coupon game, they may actually be damaging the business they love most. Businesses that see flagging sales are more likely to participate in the first place, and it’s common that those deep discounts actually cut further into their bottom lines. Patrons who seek the cheapest options are unlikely to purchase more than their vouchers are good for, and thus each Groupon is accepted at a loss. Groupon may turn a nice profit from the collaboration since it’s not their merchandise or services on the line, but the small restaurants lose, big time. Whether a business fails or succeeds is entirely in the hands on the consumer, which means that this is one case where individuals can make a difference and vote with their dollars.

Anyone who cares enough to invest in a voucher coupon presumably wants their local eateries to stick around, provide more great deals, and of course the food that makes it all worthwhile. Outsourcing the discounts to a middle man is often the big problem, and one that patrons should ultimately avoid. That’s not to say that all coupons are bad for business owners, but seek instead for deals that come straight from the source. Many casual restaurants and coffee shops in particular already have customer loyalty programs which reward repeat businesses. Ask at the counter, and shoppers may be rewarded with a free beverage or appetizer after a certain number of purchases. It’s a nice bonus for being a regular, and a cost that’s more easily subsidized by the establishment in question.  Managers who don’t employ such a tactic may not have thought of it in the first place, so don’t hesitate to suggest starting up such a program to those not participating. Don’t be afraid to speak up; owners interested in pleasing their customers, and especially their loyal fan base, should be open to suggestions.

If the attraction to Groupon shopping is too great to shake altogether, a single discount deal won’t bankrupt a restaurant, but vouchers shouldn’t be like free meal tickets. Purchase Groupons sparingly and don’t be selfish.  Although Groupon and many similar websites allow users to purchase additional copies of the same deal as “gifts,” limit purchases to one of each offer. Although it’s against the terms of service to cash in “gifts” for oneself, it’s sadly a common practice, as an estimated 50% or more of these Groupon deals are in fact illegally cashed in by the original purchaser.  Additionally, be prepared to spend more than the total value of the deal, since that’s the only way that restaurants can break even. Most importantly, do not forget to tip, and tip well. Waiters and waitresses are often the first to suffer from patrons who abuse the system, and seem unwilling to part with a dime beyond their paper contracts. Tips are not included in these vouchers and there’s no excuse for bad tipping on good service.

Who would intentionally create such a short-sighted business plan, which damages its own sources of revenue? No one, and certainly not any savvy investors; Groupon was not designed to ruin restaurants. There’s good reason why it’s still influential and drawing new supporters, and that’s because for some, it does work the way its intended. When smart discounts and price points are set, proprietors can up-sell items and ultimately make a profit, in spite of the vouchers. What’s more, new customers can be attracted to the low prices at first, but become regulars once they finally try the venue. In a perfect world, this is the ideal outcome of a Groupon for both parties, and while it’s not impossible, it’s becoming increasingly difficult to achieve.

If it seems too good to be true, it probably is. Groupon fits perfectly into that concept, promising much more than it can ever hope to deliver. Although the customers are probably never clued into the damage they do, they hold the key to whether their internet-based vouchers make or break a restaurant in dire straits. Avoiding them altogether and simply supporting your local small businesses is the best tactic, because they need every dollar to stay afloat in these difficult times. The customer really does decide the fate of an establishment with both their fork and their money, so put them somewhere you can trust; not a faceless web-based company, but with the talented, hardworking chefs found right around the corner.

13 thoughts on “The Writing on the Wall, Part Two

  1. I certainly admire people who start small businesses, restaurants in particular. It’s such an inspiring idea but I can only imagine how difficult it must be. I bought a bunch of Groupons at first, including a couple for restaurants. I found it a good way to try a restaurant without a big investment. One of them I really didn’t like and wouldn’t return to, so I was glad I hadn’t paid the full price. I definitely see your point, though. The other issue is that I sometimes don’t end up using the Groupon…I have a knitting shop one and a photo book one that have expired.

  2. This is an excellent perspective to share. I usually don’t purchase social deals pertaining to restaurants because it’s rare I see one for a vegan-friendly place. I do occasionally purchase them for pedicures because it’s not something I treat myself to often at all and I know I need a little downtime to do those things every once in a while. What I find is that the establishments that do spa-type services through the social purchase websites are sometimes lacking business and think the coupons will boost it. Sad, but true!

  3. Another wonderful post Hannah. We never caught onto the Groupon/any coupon trend, because there were never the coupons/ deals by the places that we wanted to visit. We saw our friends buying up a bunch and then trying to use them in time. I think the only deal I have purchased in all of the past year was for a massage, but have found a near by better therapist since then.
    I agree with you about the fail at the marketing the businesses hope for. Since all the acitivity of social purchasing and its use is all out there on the social network, i know that no one really went back to the businesses again. it was just a deal.

  4. I love this post as I think most people don’t understand how damaging Groupons/Living Social Deals are, especially to mom and pop businesses. One of my favorite vegan shops in Sac closed, and they blamed it on losing too much business from the groupon that they ran. I also think it’s hard for smaller places to compete with all of the “deals” that are out there. I’ve bought a few- haircuts, massages, facials, some restaurants in the past but have stopped doing so. I would rather just visit the places that I like and pay them full price. I also think this is because I have never been that satisfied in the services I’ve received.

  5. Certainly a “fool me once…” memory for me! Not such a good deal when the coupons are not honoured by the business you are attempting to use them in or the offer isn’t quite what it says it is…I choose to use loyalty cards all the way now. When you frequent a business often enough they know you. We need to support the local businesses not the middle man and this article is most definately a reminder that we should cut said middle man out. I have a real issue with the middle man…the organisation that takes from the primary producer and delivers to the customer…what are they doing? What you usually get for their services is a bit of choice BUT for the choice you are paying through the nose and the primary producer is being paid the minimum for their produce (think supermarket middle men)… the day when we rebel against the middle man and his every expanding profit margin is just around the corner! Another well written piece Hannah…are you sidelining over to journalism? I, for one, can see you in that hallowed hall of fame :). Writing, photography, amazing vegan chef extrordinaire…is there anything that this tiny girl CAN’T do? :)

    1. Aw please, you’re making me blush! Well, I might be a little bit sunburned too, but I’m so humbled by your high praise. I’ve never invested much time into writing since I typically hate it, but when push comes to shove, I do have a few things to say… Might as well share, right? I just worry that no one else will be interested in slogging through my crazy thoughts, especially when the trajectory for my blog posts has been so set in stone. No recipe, no service (or something like that.) Thank you for your encouragement.

      While I agree that there are some fat cat middle men who take more than their fair share, I must also play devil’s advocate and suggest that the producers themselves generally can’t reach all their desired customers without a bit of help. It’s a fine line, to be sure.

      1. Indeed but thats where we need to be adressing the problem with more farmers markets and CSA type schemes where the farmer is assisted in getting customers to their produce…subsidise the farmers not the GMO’s! ;)

  6. I’ve bought Groupons and their like before, usually to try a place that’s a little more expensive than I would normally go to. I hadn’t really considered this side of it. I’ve seen places that I know are doing well offer the coupons and I supposed it’s to get new people to try them. I have to say, though, that I always tip on what the total would actually be, not on the discounted amount, so as not to cheat the waitstaff.

  7. I looked at Groupon but didn’t latch on to it. I don’t want to buy anything to save on other things. Maybe sometimes it works out great, like those restaurant coupon books they sell around our area but I’m just not a big fan of trading money for a discount. I want the discount at point of sale.
    Excellent post Hannah and way to lay it on the table. As a small business owner myself, it can get a little cut-throat but I think if you’re an honest business person and don’t get sucked in, it all pays off in the end.

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