NY Times on Groupon and it’s clones: bad for merchants

By the looks of LiLo’s flooded inbox on Sunday, everyone saw the big New York Times piece about how Groupon and its clones (Living Social, Scoutmob, etc) are bad for merchants.  The article brings to light a few points LiLo constantly talks about in his perambulations around the Mission:

  • Groupon and it’s clones offer drive by deals that encourage coupon hopping rather than loyalty.  This is good for customers who just want a massage or burrito or whatever and don’t care where it’s from, but it’s not very good for the businesses.
  • The Groupon clones bring in picky, tire-kicking customers.  When customers only come in because they have a 50% off coupon, they might not value the business or experience very much.  The product or service seems cheap to them.  And to many, it’s simply “this month’s discount Thai food”.  Why should they pay full price, when another place will do a deal in a few weeks?  These customers are constantly comparing the business to others, often negatively.  An influx of them can wear on employees’ morale, and the spike in traffic can cause supplies and inventory to run low.  So the cut-rate customers come to the Thai restaurant, wait forever because of the other deal-holders ahead of them in line, find out that there’s no more Tom Kha (again, thanks to the other coupon holders) gets something that they don’t really want, and don’t really like it.  It’s not a pleasing experience, and it’s unlikely to lead to repeat business.
  • Deal holders tend to complain on Yelp, thus bringing a business’ rating down an average of half a star, according to the article from researchers at Harvard and Boston University that was quoted in the NYT piece.  People who frequent businesses repeatedly are more likely to be sympathetic to a new employee or someone having a bad day, while the drive bys unload a snark barrage on the business’ Yelp page.

Groupon executed a great idea, and their model works well for some businesses (those already going broke, offering lessons, etc) but it’s not for everyone.  Sadly, the army of coupon clutchers tends to walk right out as fast as they walked in.

Live Local offers much smaller discounts than the Groupons and Scoutmobs of the world.  But by offering year-long discounts that can be used all the time, Live Local encourages loyalty to neighborhood businesses.  The card only makes sense if you are going to use the it time and time again at the same local shops.  That helps increase the bond between merchant and customer that leads to a better experience for both.  So while LiLo isn’t swimming in Groupon’s possible IPO bathtub of funny money, he’s happily cooing around the Mission. :)

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