Groupon Reimagines Its GrouponWorks Site, But Does Groupon Really Work?

    July 24, 2012
    Chris Crum
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Groupon announced today that it has revamped its GrouponWorks.com site for merchants. The company says it has been redesigned to better showcase merchant successes, as well as Groupon’s toolkit of marketing products and services. It features cases studies and video testimonials like the one below.

Building Your Business with Groupon: Sylvan Learning Center from Groupon on Vimeo.

“GrouponWorks.com ties together Groupon’s entire suite of merchant products, services and resources and helps business owners select the tools that meet their needs,” said Sanjay Gupta, VP of Merchant Marketing at Groupon. “Best of all, visitors can listen to merchants—in their own words—share unique accounts of how working with Groupon had a positive impact on their businesses.”

Interestingly, the GrouponWorks redesign comes at a time when a story about a business shutting down, and blaming Groupon is getting some attention. The Atlantic reports that Back Alley Waffles in Washington D.C. is blaming Groupon for making them wait three months to get paid (three months from the opening of the restaurant), and ultimately fostering the business’ demise. The Atlantic’s Rebecca Greenfield reports:

In April Craig Nelsen opened up Back Alley Waffles in the Shaw neighborhood of Washington and did what lots of new small business owners do: put a deal on Groupon offering $16 worth of waffles for $8. The way this works is that people pay Groupon their $8 and then take a certificate to redeem at Nelsen’s waffle house. The money comes later from Groupon (which usually takes a 50 percent cut). The promotion was very popular. So popular that there are many reports that customers would show up to a sign at the front door saying they had run out of Waffles and the staff was running out to Safeway to get more ingredients. But unlike other businesses who have been blindsided by their Groupon deal’s popularity, Nelsen was more than happy to make more waffles, but he ran out of money.

If you go to BackAlleyWaffles.com, you’re greeted with a message telling you that it is “close indefinitely due to the bloodthirsty business practices of Groupon. Waffles are now $450 each by appointment only.”

Back Alley Waffles

It would seem that Groupon does not work for everybody. That said, Groupon has its own side of the story with how that whole Waffle deal went down.

Update: Additionally, the company gave us this statement from Groupon Spokeswoman Julie Mossler:

“Mr. Nelson initially approached Groupon and our merchant advisors structured a deal to best encourage overspend and help his business grow. We also required Back Alley to cap the number of Groupons sold to ensure the feature was in the best interest of both consumers and the merchant. We scheduled his feature on his terms, on a date he selected, under a contract he reviewed and signed. According to our records, only 132 Groupons, or 18% sold, have been redeemed since Back Alley ran two months ago, and Mr. Nelson has received 2/3 of his share of the revenue to date. We always hate to hear that a local business has decided to close, but the math does not point to Groupon as the cause.”

Groupon also has 525 success case studies on the site.

  • Shay

    Groupon works for businesses – not hobbyists.

  • Richie

    Sounds like plenty of parameters are available to be put into place. Unfortunate that the businesses was undercapitalized.

  • http://www.placestoeatokay.com Steve G

    The main problem with Groupon is that you first have to give people a discount of at least 50% to get them to buy your deal. Then on top of it you have to give Groupon 30%-50% of the revenue they collect. I heard it depends on the price you are selling the deal at and how many you are selling and what kind of discount you are offering plays a factor in what Groupon takes as their commission. So if you have a high margin item, you could afford to do that all the time, and then you also have to consider quantity and capital to cover the number of offers you are selling. I would think Waffles are pretty easy to make and don’t require a huge amount of capital, but it depends on how many, in this case, Waffles you sell through Groupon. The second problem of Groupon is that if you don’t have a high margin item you are depending on repeat customers to come back and pay full price and they might think you Waffles are good, but really it was the deal that got them to go to your place instead of going to breakfast at their regular place, so they may never actually come back to pay $16 for Waffles. Heck, they might have even thought at $8 it was not even a good deal for Waffles. Interesting that only 132 deals were redeemed and that was 18% of the actual total that were sold. I mean how on earth could 132 redemptions at 50% retail really shut down his business? He made full price on all the coffee and other items they purchased right, or did he only sell Waffles and nothing else? What about all the other people who saw people in line and didn’t have a Groupon and purchased Waffles and whatever else that day? Something just doesn’t add up to me. But Groupon can harm a business if you’re not careful about how many deals you sell and at what price you sell them at and how much Groupon takes. I’m all for giving somebody a discount, but you have to be careful you still make money on the deal and are not relying solely on repeat customers to make up for the loss in profit, basically giving away something for your cost in hopes they will return, because they may never return for another purchase unless they have a discount to give them a reason to return.