Do Daily-Deal Sites Like Groupon Work for Local Businesses?
LivingSocial, Amazon Local, and small companies
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Nat Mundy, co-founder and vice president of the 120,000-square-foot family entertainment center Grand Prix New York in Mount Kisco, knows that customers who purchase a racing and arcade package from Groupon are likely to stay for bowling and bouncy-castle time, too. “Plus they are going to eat,” Mundy says. “We never offer food on our Groupons, which helps us to control our costs a bit.” In addition, Grand Prix’s Groupons are based on peak (weekend) pricing, so the company is not actually losing that much revenue when customers redeem the deals during the week.
And because all Groupon customers who come in to Grand Prix have to sign a waiver, Mundy is able to collect their contact information and send them promotional emails. “Groupon has helped us broaden our reach to customers in New York City, Long Island, New Jersey, and Connecticut who would never have known about us,” Mundy adds.
When the deals are very popular, the volume of cash they produce for local merchants can be significant. “We’ve used these deals as a short-term revenue generator,” notes Wendy Vigroux, owner of Westchester Yoga Arts in New Rochelle. “The payments from our most recent offer are helping finance our move to a bigger space.”
When more than 1,200 people purchased an $85 Groupon for the always-popular French restaurant La Panetière in Rye, the volume helped deflect increased food costs, says General Manager Cheryl Just. “The Groupon was also a great way to boost business in a down economy,” she adds. “A lot of people who want to come to La Panetière, but maybe couldn’t afford it, were excited to be able to dine with us. It also helped to bring back customers that haven’t been here in years.”
But while there are clearly a lot of benefits to offering daily deals, the most common challenge—turning those customers into loyal, full-price patrons—is enough to threaten the efficacy of the whole model, according to Chiagouris. “Because of the economics of these deals—companies discount their products or services and also have to share the revenue—it is a losing proposition unless you can be sure that the deal will result in someone continuing to do business with you at a more profitable rate,” he explains.