This holiday season, some small businesses are putting Groupon on their ‘naughty’ list.
Even with the last few months of the year being the burro that carries most of their profits, smaller operations around the nation are shying away from Groupon and other daily deal sites. They think the added marketing and traffic is not worth the extreme price slashing.
Repeat customers, the real tasty fish businesses try to hook with Groupons, are an endangered species.
Groupon has been around for several years now, as well as a whole batch of copycats like LivingSocial and Google Offers. Many businesses have tried out these daily deal sites for multiple years running. And many have been disappointed.
Jennifer Untermeyer owns TravelKiddy, an online toy store. Last year, she ran five daily deals during the holiday season.
"We can tell how many people we've had repeat, and it's eight or nine out of 3,000 deals," she told Oliver St. John of USA Today. "We ended up in an overall loss, even factoring in the marketing benefits."
She’s skipping that strategy this year.
Anthony Bruce, a retail analyzer, explained to St. John the daily deal danger for small businesses:
"If there are future purchases that occur because of a Groupon, that's great…If it's an incremental visit I wouldn't have gotten anyway, it's bad. If it's a visit I would have gotten anyway but did it with a Groupon, that's terrible."
The era of daily deals may soon end. The last half of 2011 saw the shuttering of nearly 800 daily deal sites. Hundreds more followed in 2012. Groupon’s IPO last November was $20. Even though they are higher than their all-time low, shares are currently hovering around $4.50.
It is slowly becoming evident that it is difficult to turn the short burst of energy from a daily deal into long-term success. Businesses almost always run a deal through Groupon at a heavy loss in exchange for potential repeat customers. Many businesses are finding those repeat customers a minuscule percentage of daily deal buyers.
In this economy, small businesses are placing less risky bets. For more and more shop owners, past experience has demonstrated to them that daily deals aren’t just risky, they’re an all-out loser.
This article is part of the Drive Your Business Forward series. Check out allvoices.com/smallbusiness for more tips and advice on how to succeed as a small business. This series is supported by Mercedes-Benz Sprinter.