The downside to Groupon
Hailed as a marketing no-brainer for businesses, Groupon's track record is beginning to show that its service is not for everyone.
On a mild February afternoon in Portland, Jessie Burke is surrounded by sweets but still bitter.
Burke, a 30-year-old mother, owns and operates Posies Bakery & Café, a 25-to-30 seat family shop that's become more notorious over the past half-year than is usual for a small Oregon-based business.
Last September, fed up with her experience, Burke took to her company website and blogged of her dealings with Groupon, the online coupon site she had become a client of months earlier.
In dubbing her choice to use the popular Web start-up, which promoted her deal of $6 for $13 worth of product, the "single worst decision I have ever made as a business owner thus far," Burke became a reluctant crusader for the world's small businesses. Her blog was picked up by many major media outlets, and soon The Washington Post and The Wall Street Journal were inundating Posies with phone calls. Up until that point, it had been the first shot across the bow at Groupon — the biz that'd been hailed, only a month before, as the "fastest growing company ever" in a favourable Forbes cover story — and everyone had an opinion.
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"I was frustrated," Burke said over the phone last week, only taking MSN's call after repeated requests for an interview. "I never wanted [the blog post] to go viral, I just wanted to tell my local community about my Groupon experience."
What she told her community, and soon much of North America, was how her Groupon relationship went sour. After her deal was posted on the site last March, nearly 1,000 Posies Groupons were sold, resulting in a rush of customers that crippled the small café for months. In spite of Groupon's insistence it allows merchants to cap the amount of vouchers sold, Burke says she was given no such option. And, indeed, original correspondence emails detailing the deal's terms provided to MSN show no mention of a cap discussed between the two parties.
For this, Burke takes her share of responsibility. In hindsight, she says, she should have insisted on a cap, but she also blames her Groupon sales rep for not giving her such an option. "And why would Groupon want it any other way?" she wrote in her original blog post. "They get half of the earnings." (Groupon, for the record, typically takes 50 per cent of revenue from a deal; the merchant gets the other half, minus credit card fees.)
After her post, Burke received feedback from every side of the equation. Groupon founder and CEO Andrew Mason contacted her personally, expressing his genuine regret for her negative experience and offering an olive branch to help find an agreeable resolution. But, as the deal site has taken to doing, he also waved a number at Burke that, in addition to being a contested figure, irked the Portland business owner.
"We take a lot of pride in the fact that 97 per cent of our merchants want to be featured on Groupon again — a far higher satisfaction rate than any other form of local advertising — not that we'll be satisfied until that number reaches 100 per cent," Mason wrote to Burke.
Burke, who has run Posies since 2009, said she was "irritated" by Groupon's data, taking it as a slight against her business savvy.
"It was like they were calling me a novice," she said, noting that her Groupon fiasco required she draw about $8,000 from a personal savings account to cover losses. "Meanwhile, I probably had forty businesses come out of the woodwork saying thank you. The same thing had happened to them."
Indeed, in spite of Groupon's claims that 97 per cent of merchants featured on the site would use the service again, such findings may not be bankable where many businesses are concerned. Groupon's data is constantly updated, a site spokesperson said, but does not include responses from every client. Vendors can refuse to respond to the Groupon-issued survey, which Burke did. She suggests many merchants that had negative experiences with the coupon company may not have responded, either. (Groupon declined comment on its relationship with Posies.)
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