40% of Groupon merchants say "never again"

Most of the complaints from the 40% that are saying "never again" seem to have very little (if anything) to do with Groupon specifically, but rather the entire idea of advertising on a group deal/bargain site:

Poor tips, too many customers, angry customers (due to lack of product or wait time) are all potential side effects of a Groupon deal. The author of the study, Utpal Dholakia said it was almost a given:

“Because the Groupon customer base is made up of deal-seekers and bargain shoppers, they might not tip as well as an average customer or be willing to purchase beyond the deal.”

This led to the finding that restaurants had the hardest time with Groupon deals, where service business such as spas and salons fared better. The 32% that said they didn’t make a profit from the program reported that customers rarely bought more than the coupon deal and few returned to the business at a later date.

It shouldn't be shocking to retailers that offering deep discounts on a popular discount site is appealing mostly to people that only buy discounted goods, but it seems that it is surprising to some.

Groupon may be the one to bring them customers, and you're right, it's the merchant's responsibility to convert the incoming people to customers. However, Groupon should find a way to help with this. Because if they don't, merchants will continue to blame Groupon for the failures. If this continues to happen, Groupon will fail.

Why is it that various media outlets find the whole 'hyperlinking' thing so hard?

The study author's page -

http://www.ruf.rice.edu/~dholakia/

The study itself

http://www.ruf.rice.edu/~dholakia/Groupon%20Effectiveness%20...

Here's my quite speculative thinking on the whole mess, admittedly also without having followed it in much detail.

It's not worth your time chasing such elusive bargains, unless your time is not worth a lot. (Exception, the "excitement of the hunt". See Atlantic City, Las Vegas, etc.)

If your time is not worth a lot, you're not going to be buying much (no resources). I.e. you're a low value acquisition as a customer. (And if you're into the "excitement of the hunt", then you're not too interested in settling down with a particular merchant, are you?)

It eventually follows that success for Groupon consists of promoting itself, not its customers' (the businesses contracting campaigns) long term interests. (Once again, the site's users are the product, not the customers. And while they may be nice enough people, they are not a good product.)

Also, users (the merchant's customers) associate their success with Groupon, not the contracting merchant. One-off bargains don't build customer loyalty.

P.S. Having now read the brief, linked article, I speculate further than an overwhelmed venue may actually be counter-productive; shoppers stick it out to get their bargain, but tell themselves, "Man, what a pain. I'm never coming back here again."

Groupon is pursuing a slash and burn strategy. They churn through merchants and spit them out. Their only goals are to increase revenues through

more cities more offers more revenue per offer higher share

Ultimately their interests are not aligned with those of their merchant partners. They refuse to cap the quantity on offers. They push for 50%+ discounts. They do nothing to discourage breakage. They use good businesses to attract their members but then they punish bad businesses with predatory pricing. So good businesses erode their brand.

Lots of problems here. Their model is far from broken (because there are so many businesses and the unit economics still work for their members) but someone will come along and fix this model for them.