Do Daily-Deal Sites Like Groupon Work for Local Businesses?

LivingSocial, Amazon Local, and small companies



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Full disclosure: I’m something of a Groupon groupie. Like a Pavlovian dog, I salivate when the emails pop up in my inbox—alluring messages promising 50-percent, 60-percent, even 80-percent discounts on the hottest local fitness classes, haircuts, restaurant meals, and other goods and services. I’ve purchased some 15 to 20 offers from Westchester businesses via daily-deal sites like Groupon, LivingSocial, and Amazon Local. I’m living proof that, from the consumer perspective at least, daily deals are genius. 

But how do businesses fare in this model? Are Westchester companies actually making money and gaining loyal customers from these steeply discounted packages? The answer is yes. And no. And sometimes. 

The booming popularity of these daily deals is easily understood. They offer local merchants a fast and easy way to advertise to a huge database of eager email subscribers. And unlike traditional advertising, there is no upfront cost. Instead, merchants have to offer a discount typically around 50 percent, and share the revenue from the purchase of the deals with the daily-deal site. With Groupon, for example, it’s generally a 50-50 split. 

“Our goal is to help local companies create customized campaigns by identifying their needs and their goals—whether they want to gain exposure, pull in extra cash, or find new users. Then we coach them on how to best retain these new users,” explains Andrew Graham, Groupon’s city manager of New York.

For some local companies, the daily-deal model has been a godsend. When opening its first location in White Plains, Westchester Burger Company used Groupon as its only source of advertising. Just four days after launching the deal, the restaurant sold more than 3,000 deals ($7 for $15 worth of food) via Groupon. The company, which has since added locations in Rye Brook, Mount Kisco, and Nyack, New York, now offers a Groupon about every six months, with more than 8,900 hungry diners purchasing its most recent offer. “Groupon is a guaranteed marketing tool for us,” says Michelle Bernal, one of the general managers of the restaurants. 

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