(Written by guest contributor Andrew Albritton)
To say they\’re the latest craze in online shopping would be an understatement. Groupon, Living Social, Social Buy etc. have taken the web by storm, revolutionizing how \”deal of the day\” type websites meet local brick and mortar business. Traditional \”Deal of the day\” type sites are typically affiliates that have great discounts from advertisers that have a large online presence and may not even have brick and mortar stores that are only valid for 24 hours at a time.
Why do all of the online businesses get to have all the fun, you\’re probably wondering? Well, this is all changing largely due to a recession and an inability for many small brick and mortar businesses to adapt to an online world filled with social media, mobile marketing, search engine optimization, search engine marketing, affiliate marketing etc. These are all things the guys online do well and in many cases have been doing for years now.
Herein lies where \”deal of the day\” meets the classic small brick and mortar business and group buying is born and has now flourished in the last year or two. Latecomers to the party are showing up a dime a dozen. So how\’s it all work, you may be wondering?
Groupon for example has the ability to geotarget their web traffic. They have massive amounts of followers and connections in Facebook, Twitter and LinkedIn. They know how to make their site rank well and can supplement it with paid traffic. They have a sales force based in each of the cities they are in that go out and seek to negotiate the best deals from the best businesses. Most small brick and mortar business can\’t compete on this scale and can barely wrap their heads around some of these things.
After Groupon goes into a city and partners with local businesses, they work on a pay for performance basis. The business and Groupon agree to a voucher, gift certificate, service, sale item etc. that will be offered for just 1 day to the Groupon audience. It is typically a discount as great as 50% off of what the business typically charges for a product or service. The concession for the business is that Groupon promises that an agreed upon amount of \”deals\” have to be sold in order for this group buy to take place.
If the agreed number needed for the group buy to take place is 200 and Groupon can\’t get 200 customers to commit, the business pays nothing and gains some exposure. Groupon is out its efforts and lost revenue for that day.
If the agreed number of group buys is met, that business now has to sell whatever the agreed upon \”deal\” was to those shoppers as well as pay Groupon roughly a 50% commission check for all sales.
Groupon\’s redemption rate is around 90%, so this isn\’t like a mail-in rebate where redemption rates can be half that or less. Businesses can be caught in a pickle if they aren\’t well prepared to take on a massive onslaught of customers they are barely going to break even on. Many customers are going to come seeking exactly what the group buy \”deal\” was for and have no intention of ever returning.
For the business, it\’s best to have a good or service where a customer can be upsold or where a consumer gets to see the true value in your business by interacting with your staff. If you are a bakery that has ovens imported from France with a 4th generation baker, conveying that while you are able to interact with your group coupon shoppers is going to be key.
With each redemption, you are really only buying yourself an opportunity to interact with potential customers and create some buzz while doing it. Getting a group buy coupon sold is only half the battle. Success may ensue based on how the opportunity is seized, how many customers can be upsold, and how many you can convert into repeat customers. Just getting on a group coupon site and selling a \”deal\” is a great opportunity for future business, but it\’s up to the business to make the most of that opportunity.