Our offer through Groupon instantly boosted the number of guests coming into the restaurant for brunch by 5X. The effect was immediate!Dave Pressley, Eventide
Groupon reaches people that you couldn't normally reach. It's like having captive consumers.Christine LaPausky, D'ames Day Spa
I believe Groupon is definitely better than other forms of advertising
because you can actually see a return on it. This was huge for us. Our Groupon
sales were 27% of our total sales this past month.
Bryan Ross, Dr. Martens AirWair USA
Published on April 21, 2010 by Phil Lempert
Is it a thrill to wake up each morning eager to see a new great deal from a local business? Groupon thinks so. That’s the hook it hopes will have millions of consumers in a growing number of American cities sign up and provide the critical mass that prompts stores, restaurants, salons, fitness centers and other establishments to dive in with offers.
A counter on the website yesterday indicated 4.1 million Groupons (group-driven coupons) bought and more than $158 million saved by consumers in 48 cities since the site’s inception in 2008. Deep discounts can happen if enough people buy a Groupon to drive ample traffic and exposure for the effort – otherwise the offer disappears.
Two recent offers in New York included: Spend $25 for $50 value of grocery delivery from FreshDirect (3,907 Groupons bought on December 31, 2009). Spend $15 for $35 worth of gourmet groceries at Amish Market Tribeca (2,791 Groupons bought September 22, 2009).
Clearly, low-margin supermarket operators need to be careful about how they offer steep discounts, and how they measure success on a tactic such as Groupon. Yet its ability to build traffic seems powerful. In late-March 2010, August Grocery, a tiny independent, used a Groupon promotion to bring about 300 people to its 1,700-square-foot store in Wicker Park, IL, reported Supermarket News. For $12, Groupon buyers got $25 in fresh groceries and culinary counsel; some 2,891 people bought the Groupon, and 300 cashed it in during the first week of the offer.
“I can’t imagine any way I could get my name in front of 3,000 people in 14 hours and have the costs [of advertising] deferred over a year,” George Djurovic, the owner of August Grocery, told SN. August will pay Groupon a $6 fee for every Groupon redeemed within the year.
In effect then, August will net $6 in exchange for every $25 in products/services he gives to Groupon buyers. How many of those people will become regular or occasional shoppers at August? How long will it take to achieve a targeted return on his investment? At The Lempert Report, we think these are interesting questions that retailers will have to begin to weigh on a larger scale. We also think offers will have to become more sophisticated and unique to a store’s capabilities in order to avoid brutal markdown wars.
For now, and maybe for a long time to come, the use of Groupon and other new-media tools are an effective tool for small retailers like August to impact a market—because based on size and purchasing clout, they might not otherwise be able to compete price-wise with the major chains.
