The pitch to business owners from Groupon is a simple one and it’s a pitch that makes a lot of sense, in theory. Groupon offers businesses the opportunity to gain massive exposure on their website by posting a coupon that, more often than not, offers a deal that would never be available elsewhere. For example, a retail store might sell a Groupon for $20 that entitles the customer to $40 in merchandise, a savings of 50%. The $20 the customer pays for the Groupon goes directly to Groupon and they split the proceeds, upfront, with the business owner.
When it is all said and done, that local retail store will end up selling $40 worth of merchandise for $10. For most businesses, this represents a loss since the $40 in merchandise cost them more than $10. But despite this, and as Groupon’s pitch would have you believe, that loss is well worth it. And in many cases they force new partners to take less than half of the Groupon’s selling price. To continue the above example, instead of $10 the store may only be receiving $8 or $5 for $40 in merchandise.
Groupon’s pitch is undeniably brilliant. It convinces businesses they’re making […]