Why Groupon Sucks for Merchants and LivingSocial Doesn't • Hacker News Board

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#31

Post by [deleted] » Fri, Apr 22, 2011, 7:09 AM UTC

lawnchair_larry wrote: post #22

aresant wrote: post #2

Longish article, summary: - Restaurateur tests both Groupon / Living social - Groupon only phone solicitations, unresolved issues after a month vs. LivingSocial took time for in-person rep visit, excellent merchant service. - Groupon at 50/50 split, LivingSocial 60/40 in merchant favor - LivingSocial charges no CC fees, Groupon charges 2.5% - Non-scientific "LivingSocial customers [have] a little more IQ it seems [th…

You missed the part about the Groupon rep encouraging fraudulent Yelp reviews, which I feel is an important point.

[deleted]

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#32

Post by illumen » Fri, Apr 22, 2011, 7:19 AM UTC

patio11 wrote: post #29

Why on earth is the CEO of anything engaged in a long-running email discussion over two fraudulent coupon redemptions of $10 coupons? Mentally chalk it up to "cost of doing business" and move on. Shrinkage should not be a new experience to the owner of a fast food restaurant. (Neither should pathological customers, although I could see a Groupon getting you more of those than usual.)

In an e-commerce business, fraud is the main risk and also the main problem to solve. Especially in a company that is essentially printing money.

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#33

Post by pbreit » Fri, Apr 22, 2011, 7:46 AM UTC

aresant wrote: post #2

Longish article, summary: - Restaurateur tests both Groupon / Living social - Groupon only phone solicitations, unresolved issues after a month vs. LivingSocial took time for in-person rep visit, excellent merchant service. - Groupon at 50/50 split, LivingSocial 60/40 in merchant favor - LivingSocial charges no CC fees, Groupon charges 2.5% - Non-scientific "LivingSocial customers [have] a little more IQ it seems [th…

Shortish article summary: no information about which performs better.

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#34

Post by pbreit » Fri, Apr 22, 2011, 7:48 AM UTC

johnx123 wrote: post #28

trotsky wrote: post #26

Earlier quoted context omitted.

prediction^3: Interest in group buying wanes both from consumers and business owners. Groupon branches out to a more traditional ad network/ad services company with a local focus to try to leverage their sales staff. Living Social accepts reduced margins compared to todays market and sticks it out in some of the niches that work well like day spas.

Another prediction: Most merchants will start their own deal website like http://thesuperdeal.com/birmingham/deals/recent Read somewhere that these guys use agriya groupon software, part of their ideas were copied by real groupon in their 2.0 release.

That doesn't make sense. The main benefit of Groupon, et al is finding new customers.

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#35

Post by roel_v » Fri, Apr 22, 2011, 8:02 AM UTC

fookyong wrote: post #27

lawnchair_larry wrote: post #23

How much do you get to pocket on people not redeeming their groupons/livingsocial coupons? As in, what percentage are bought but never redeemed? 50% seems like a big hit, so for these to make business sense, the merchant must either make up for it by people buying more than the minimum, getting repeat customers, or getting some cash from people that pre-paid and never bothered to claim their goods/services and having…

The accounting term for this is "breakage". http://en.wikipedia.org/wiki/Breakage Any business that runs a coupon campaign will usually account for breakage. It's factored into the numbers of whether a campaign is executable or not. The percentage will vary for every business / every campaign even for the same business.

"The percentage will vary for every business / every campaign even for the same business."

Obviously, but for the same business, controlling for external factors (season, ...) and with sufficiently large sample sizes of customers, there must be an indicative spread?

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#36

Post by alanthonyc » Fri, Apr 22, 2011, 8:33 AM UTC

patio11 wrote: post #29

Why on earth is the CEO of anything engaged in a long-running email discussion over two fraudulent coupon redemptions of $10 coupons? Mentally chalk it up to "cost of doing business" and move on. Shrinkage should not be a new experience to the owner of a fast food restaurant. (Neither should pathological customers, although I could see a Groupon getting you more of those than usual.)

Three emails regarding two separate incidents over the span of 28 days (and counting) does not seem excessive to me.

As far as the CEO being personally involved: he's evaluating the effectiveness of a potential long term strategic tool. His issue is with the process in place by Groupon for dealing with said incidents, not the specific incidents themselves.

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#37

Post by dexen » Fri, Apr 22, 2011, 12:37 PM UTC

This is insightful post, but I think this kind of difference between service quality is to be expected.

Compare Groupon -- a well-funded company and relatively well-known brand, which seem to consider themselves to have strong position on the market, with LivingSocial, who seem consider themselves fighting an uphill battle against an incumbent.

No wonder LivingSocial works hard on differentiating themselves form the competition. No wonder Groupon tries to cut the costs by providing what they consider bare minimum service.

I think you'll find similar example everywhere you go, where imbalanced markets and competition are at work.

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#38

Post by awakeasleep » Fri, Apr 22, 2011, 2:54 PM UTC

Cherian_Abraham wrote: post #12

IMHO, this is what I would wish for either Groupon or LivingSocial to do. Instead of just throwing it back on to the business once the groupons are sold, be involved beyond that point. Infact, know which customers fit in to that top 5% who actually consistently spend beyond the value of the groupon. Those are the customers that you would want to refer to your clients. If there was a feedback loop back from the busine…

Actually, I think Groupon does this. I don't know what they do with the information, but along with the "flag as bad customer" they have an option for merchants to mark good customers, too.

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#39

Post by acangiano » Fri, Apr 22, 2011, 3:05 PM UTC

Cherian_Abraham wrote: post #12

IMHO, this is what I would wish for either Groupon or LivingSocial to do. Instead of just throwing it back on to the business once the groupons are sold, be involved beyond that point. Infact, know which customers fit in to that top 5% who actually consistently spend beyond the value of the groupon. Those are the customers that you would want to refer to your clients. If there was a feedback loop back from the busine…

This is a very good idea, but let's push it further. Groupon could let people collect points and badges for their continued patronage at stores that were featured by Groupon. These badges would identify the best customers, and Groupon could offer them rewards. People may feel even more motivated to continue shopping at such stores, and Groupon will know who the loyal customers are. Groupon could literally become an Air Mile card of sort.

Re: Why Groupon Sucks for Merchants and LivingSocial Doesn't

#40

Post by localtalent » Fri, Apr 22, 2011, 6:51 PM UTC

lawnchair_larry wrote: post #23

How much do you get to pocket on people not redeeming their groupons/livingsocial coupons? As in, what percentage are bought but never redeemed? 50% seems like a big hit, so for these to make business sense, the merchant must either make up for it by people buying more than the minimum, getting repeat customers, or getting some cash from people that pre-paid and never bothered to claim their goods/services and having…

50% is a huge hit, particularly in low-margin high-volume businesses. Obviously anecdotal, but it's not hard to see 93% of consumers (FTA) using the deal and never returning.

That's why something like TheLevelUp (https://www.thelevelup.com/merchants) makes more sense to me - the ultimate goal is return business, it seems shortsighted to essentially pay people to come in the door and then hope they stay. The value comes from thinking about how to get people to visit a second and third time. Good service and product at a fair price works wonders, but I'm curious to see what happens when some of these services throw other incentives into the mix.