They can do it because there is no shortage of companies throwing themselves at Groupon. And Groupon knows it:
"And now there are many more businesses trying to join Groupon than it can handle. Owen noted that the company takes a big cut of the revenue (up to 50 percent) earned from these deals. But since Groupon has a waiting list of 35,000 businesses, Mason said, “If we were economically rational, we would take even more.”"
I've bargained at furniture stores for a leather sofa because I thought one of the cushions looked "off color" (it was, but just _barely), and my mother once bargained $100 off of a refrigerator at Best Buy, and she didn't even buy the damn replacement plan. You can cut up to $20/month off your cable bill just by threatening to leave.
Everything is negotiable, and everyone likes to be negotiated with (even the drama queens in car sales that yell in outrage in the back room with their manager then gives you your price).
99% of the consuming public doesn't give a damn about doing that, though; probably because swiping plastic doesn't feel like money until the end of the month.
Come now, we don't call Microsoft or Cisco's (or any other) outsized profits a "sucker's chest" now do we? And, most of us either have or once bought a house or mechanized vehicle, and we didn't go there, look at the flyer and say "well, that's the price. Where's my wallet?"
Haggling is healthy, it's the lifeblood of commerce. If it's how retailers negotiate at the wholesale level, why can't we turn around and do it at the consumer level?
I think, if you call it anything, you should call it the "authority tax", because you're trusting their price as gospel because they're the big, scary faceless monolithic vendor of great success. They're just a business. We're all in business. We all should be looking at CDW, OfficeMax, Dell, Apple, as the same as us. It's American worship of the corporation that makes us roll over and give them all their 30% growth year over year, not the fact that they're "honest".
Sure, some people might be okay with the haggle or even expect it.
At my company, I've come across people who find it in their nature to haggle the price. There are only 2 ways to deal with them. Up the price and come down to your normal price or don't deal with those customers.
99% of the time, I tell that we don't negotiate price. We charge what we charge because we do a good job and you're going to love it when we're done. 1% it's a good friend so yea...
If they ask again, I tell them we're not a good fit for each other. 7 times out of 10, they try to convince me to do business with them after that. 3 out 10 walk away, which is awesome because they just saved me a shit load of headache.
Nothing personal but I feel cheat out of money if I give into hagglers and if I'm not happy, I find it harder to serve them as well as I want to. Better to refuse that business than to provide sub-par service.
Yeah, insane. When I first heard about Groupon, I assumed their cut would be ~10% mark. I couldn't believe it was 50% - and that's on top of a 50% discount! So the retailer is only getting 25% of normal income.
What kind of business has advertising overheads of 75%? I can't see how this could work for anyone. And you can't cap the number sold? wtf??
I feel really sorry for her. She got sold the deal by Groupon, against her better judgement. I know how that feels, we've all done it. She wont make that mistake again.
1. They are betting people will spend above their groupon value. So if you have a $30 that give you a $60, they are hoping you will buy $90 worth of food.
2. They are trying to get loyal customers that will come back every month and have a greater life time value than that first sale.
For many businesses, betting that people will spend a percentage above their discount is a reasonably safe bet. For a coffee shop though, I can't remember the last time I spent more than 20 dollars for a couple cups of coffee and a sandwich over an evening hacking in the corner. For this shop to bet that most people would spend 20+ dollars with 13 of that being the 6 they spent on groupon is insane. If your average sales are $50 or more, than this particular deal might have been viable, but it seemed that many were walking out the door having spent only 6 to groupon for their entire purchase.
I feel for the business, however. I've had to turn down customers that I know aren't going to be repeats, and it is difficult. But at the same time, I would never ever agree to a 75% reduction to my sales. My repetition period for returning customers about 4 years due to the nature of my business, so maybe I don't have the market for that kind of thing though.
1. Yes sure - but this is a big bet. And in this case it didn't happen.
2. Understood. But the aggressive discounting is going to encourage a lot of people who just want to get something on the cheap, and will never go there again. As point 1, you've no idea how much repeat business you're going to get.
I would never do this unless I could cap or trial it first, so I could get a proper assessment of what the deal is worth.
Much like four bucks for caffeine water, that depends entirely on two parties agreeing it is worth that. (Starbucks certainly has a marketing spend over $10 per customer. LTV is in the hundreds or thousands for a daily latte drinker.)
Right. Because the beans pick, deliver, roast, grind and brew themselves.
I haven't been to Posies cafe, but the local independent coffee place I stop at most days on my way into the office charges less than $2.00 for all 3 size options (12, 16, 20oz), deals almost exclusively with organic sustainable save-the-planet type growers, has beans from around the world, and a top-notch large batch roaster in house (which someone has to staff for pretty much the entire roasting period).
If they were actually charging $4 for a "caffeine water", then they shouldn't be bitching about Groupon (IMO). If they're charging the more typical ~$2 for coffee, ~$4 for an espresso drink, then their prices are pretty reasonable, and you have to sell a fuck-ton of cups to make your rent.
Isn't almost everything entirely dependent on two parties agreeing that it is worth the given asking price?
Coffee at Starbucks is a lot less than $4. Also, you aren't just buying the beverage but also paying for a reasonably comfortable place to sit and drink it.
