By Tom Ryan
Groupon.com is a growing daily-deal website built around "collective buying power." The twist versus other coupon websites is that a certain number of people need to sign up for the steep discount or nobody gets it, encouraging consumers to share with friends.
In practice, Groupon emails "deals" -- typically 50 percent off local restaurants, retailers, spas, etc. -- to its members every day. Consumers get a short time to agree to purchase the coupon online. If enough members sign up for the deal, the consumer is charged and receives an e-mail with a link to view and print a coupon, called a 'groupon.' Groupon keeps half the revenue that consumers pay online, leaving the restaurant with about 25 percent.
For businesses, the word-of-mouth nature of groupon.com helps quickly reach new consumers who can be turned into repeat customers.
"When you see the deal, in order to get it you have to share it with your friends on Facebook, your friends on Twitter, forward it to people via email," Andrew Mason, Groupon, founder & CEO, tells todayshfv.com. "It gives the merchant what they want, which is a huge number of new customers, and of course the customer gets what they want, which is a really great price on something cool to do."
Still, Groupon admits that the initial groupon doesn't yield much. For instance, restaurants in Minneapolis offered a $50 dinner for $25. After Groupon's cut, each restaurant received $12.50 per $50 meal.
"You may barely break even on Groupon customers the first time," David Rangel, Groupon's director of merchant services, told the Minneapolis Star Tribune. "But if you bring them back once or twice, you'll get a terrific return."
One critic was Lenny Russo, chef and co-owner of Heartland Restaurant in St. Paul, who believes such deals only bring in short-term revenue and pushes down pricing.
"They know the restaurant industry is on the ropes, and they are offering people a quick fix," said Mr. Russo. "They are preying on people's fears."
Groupon currently operates in 40 cities and expects to be in 100 cities nationwide by year-end. Competitors include restaurant.com , deals.livingsocial.com, dealstork.com and crowdcut.com.
Discussion Questions: What do you think of groupon.com and other daily-deal traffic-driving websites? What are the pros and cons of retailers using such websites?