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Making a poor business decision and then somehow blaming Groupon for it is no better than building a house in a flood plain and not having flood insurance. Gro

by brm 16y ago

Making a poor business decision and then somehow blaming Groupon for it is no better than building a house in a flood plain and not having flood insurance. Groupon works wonderfully for businesses with predictable fixed costs and decreasing marginal costs - bowling alleys, stadiums, art museums etc... It does not work well at all for businesses who need to source product, prepare goods, or provide service - restaurants especially

bkmartin 16y ago
Great point. Restaurants operate on low margins to begin with, usually 12% or lower, and coffee shops can be worse (I found this out during due diligence for a shop I almost bought). To offer over %50 off already puts them in the red, then to let Groupon have %50 of the little revenue it generates is worse. This is probably a case of the business owner not understanding the types of customers they would get and at what volume they could expect them to come. Some business owners think advertising=good, in any form. Knowing your business model and which advertising models support you best is very important.
potatolicious 16y ago
> "It’s because we cannot afford to lose any more money on this terrible decision I made" Quote from the end of blog post. Having read through the whole thing I do not believe at any point she blamed Groupon for her predicament - she walked into it eyes wide open and appears to acknowledge this. It does, however, raise interesting questions about Groupon's relevance to the small businesses they purport to help. Groupon is supposed to be a win-win for consumers and small businesses alike, but it would appear this may not be the case. Seeing as how this is core to their business model, if this is a regular case I would expect this to sink Groupon sooner or later.
- anigbrowl 16y ago
  Sounds quite similar to the problems people have reported with Yelp in some ways. Stories like poison the well for anyone trying to sell net services to small businesses later on, too, even if the deal is much better value. I gather a lot of cafe owners are done with the free wifi too.
alanstorm 16y ago
It doesn't seem like Posie's is "blaming" groupon, the owner owns up to their mistakes From http://posiescafe.com/wp/?p=316# http://posiescafe.com/wp/?p=316# "the single worst decision I have ever made as a business owner" "we cannot afford to lose any more money on this terrible decision I made" Jessie owns up to being the one at fault here. Beyond that though, what does it say about online marketing, and our industry in general, that high pressure sales tactics are leading small business owners into bad decisions like this? An industry based on caveat emptor, a lack of trust between actors, zero sum games, and the love of a quick buck over all else leads to an ugly future.
- codexon 16y ago
  An industry based on caveat emptor, a lack of trust between actors, zero sum games, and the love of a quick buck over all else leads to an ugly future. That's how capitalism has worked for hundreds of years. It was only relatively recently that western nations have slowly shifted away from this model with the publication of Upton Sinclair's The Jungle, and the Sherman Anti-Trust act in the early 1900's. Of course you still have libertarian thinkers paid for by Koch Industries who preach that two greedy people will always cancel each other out, and benefit the market.

by brm 16y ago

bkmartin 16y ago

Great point. Restaurants operate on low margins to begin with, usually 12% or lower, and coffee shops can be worse (I found this out during due diligence for a shop I almost bought). To offer over %50 off already puts them in the red, then to let Groupon have %50 of the little revenue it generates is worse. This is probably a case of the business owner not understanding the types of customers they would get and at what volume they could expect them to come. Some business owners think advertising=good, in any form. Knowing your business model and which advertising models support you best is very important.

potatolicious 16y ago

> "It’s because we cannot afford to lose any more money on this terrible decision I made" Quote from the end of blog post. Having read through the whole thing I do not believe at any point she blamed Groupon for her predicament - she walked into it eyes wide open and appears to acknowledge this. It does, however, raise interesting questions about Groupon's relevance to the small businesses they purport to help. Groupon is supposed to be a win-win for consumers and small businesses alike, but it would appear this may not be the case. Seeing as how this is core to their business model, if this is a regular case I would expect this to sink Groupon sooner or later.

anigbrowl 16y ago
Sounds quite similar to the problems people have reported with Yelp in some ways. Stories like poison the well for anyone trying to sell net services to small businesses later on, too, even if the deal is much better value. I gather a lot of cafe owners are done with the free wifi too.

alanstorm 16y ago

It doesn't seem like Posie's is "blaming" groupon, the owner owns up to their mistakes From http://posiescafe.com/wp/?p=316# http://posiescafe.com/wp/?p=316# "the single worst decision I have ever made as a business owner" "we cannot afford to lose any more money on this terrible decision I made" Jessie owns up to being the one at fault here. Beyond that though, what does it say about online marketing, and our industry in general, that high pressure sales tactics are leading small business owners into bad decisions like this? An industry based on caveat emptor, a lack of trust between actors, zero sum games, and the love of a quick buck over all else leads to an ugly future.

codexon 16y ago
An industry based on caveat emptor, a lack of trust between actors, zero sum games, and the love of a quick buck over all else leads to an ugly future. That's how capitalism has worked for hundreds of years. It was only relatively recently that western nations have slowly shifted away from this model with the publication of Upton Sinclair's The Jungle, and the Sherman Anti-Trust act in the early 1900's. Of course you still have libertarian thinkers paid for by Koch Industries who preach that two greedy people will always cancel each other out, and benefit the market.