Interesting overview of how Groupon is impacting businesses that use it

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Alibi Ike

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Full article here.
Thanks to Groupon, merchants may face a similar, but perhaps even more damaging, fate. Prices are likely to erode as consumers come to expect deals. They will wait for sales to buy, and merchants will find themselves competing ever more fiercely. Meanwhile, merchants' brand power will be eroded as consumers look to Groupon (as they do to Orbitz), rather than to the merchants themselves, for the best deals.
The logic is simple: Merchants are encouraged to use the deals to attract new customers, who in theory will return at full price. But, in what seems to be an increasing number of cases, customers come for the deals and then leave for deals offered by other merchants through Groupon. So the number of "new" customers attracted by cheap prices increases, and the number of loyal customers decreases as shoppers prefer to become "new" again for whomever offers the best deal.
 

Don Draper

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This is why I couldn't really understand why business owners were excited about this service. I am glad it is not in my area yet.
 

muirford

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This is why I couldn't really understand why business owners were excited about this service. I am glad it is not in my area yet..
Don Draper said:
I am glad it is not in my area yet.
One of the local outfitters just did a groupon in the DC market. I am going to give it a little time then get some feedback from them. There has been some conversation on the PAII forum about it and I think I understand it a little better. I'm still not convinced it's for me, though.
 

egoodell

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This is why I couldn't really understand why business owners were excited about this service. I am glad it is not in my area yet..
In our area the B&Bs that are further out from town love it. They only book after all the B&Bs in town book, so they are making money they would otherwise not make. But you won't find the B&Bs in good locations doing it.
RIki
 

Generic

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I wouldn't do it. But I have considered buying deals and then offering them to guests to buy from me.
It's awfully rediculous around here, there is: Living Social, Groupon, TeamBuy, SwarmJam, Tuango, Deal of the Day (Red Flag Deals), I love Mtl, Group Buy United, Price Dodger and Steal the Deal... and we saw and add for one more but it still says "coming..."
I'm just waiting for the first one to go bankrupt. So far, we saw Teambuy have the same special for three days in a row and not be able to get 5 people to buy, before they gave up on the deal. These are going to start to dry up, the question is when.
And so far, none of the local B&Bs have been stupid enough to do this. But more power to the idiot who does, because next year, I will have one less competitor.
 

gillumhouse

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I had considered Living Social but the more I thought about it, the less inviting it became to me. One of the beautiful things about my impending trip - it keeps me from doing a lot of things because I will not be available. So I cogitate a bit more first. A good thing....
 

toddburme

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We tried to do a Groupon but they kept pushing us off and finally they want to do it now but we are coming into our good months so why would I do it? I told them, we would talk again in October.
I asked around and the thinking is that the big discount is made up by the fact that lots of people will never use it. I honestly think this is what hurts Groupon more. How many deals will you buy and not use then do you keep buying? But if we could sell rooms for Nov to Mar say at a big discount but in the end we would get about our normal daily, why not do that?
 

agoodman

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here's the question - do you ONLY buy when something is "onsale"? Do you wait to take a vacation until it is "on sale"? Do you ONLY go into bedbathandbeyond when you have a coupon? Only buy clothes when they are on sale? Some people do, most don't, so saying that this will change the way consumers buy or "erode prices" is really not correct
It goes back to the concept of VALUE not price, if you are providing good value for money people will come. If you are not they won't. Or they may come once and won't come back. Now THAT has been proven over and over again.
 

Generic

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here's the question - do you ONLY buy when something is "onsale"? Do you wait to take a vacation until it is "on sale"? Do you ONLY go into bedbathandbeyond when you have a coupon? Only buy clothes when they are on sale? Some people do, most don't, so saying that this will change the way consumers buy or "erode prices" is really not correct
It goes back to the concept of VALUE not price, if you are providing good value for money people will come. If you are not they won't. Or they may come once and won't come back. Now THAT has been proven over and over again..
How many people go to Retailmenot to look for a coupon before buying online? It is the 261st most important website in the US. Amazon taught people to look for coupon codes... and so people do. You are correct, many people buy without the coupons. Many people walk into a store to buy simply because they want it now and can't wait.
These services are meant to bring new customers who you want to buy from you in the future. And maybe it will work, but you are doing it at 25c on the dollar, with a 50c liability. Not to mention the fact that they can write you up as discounting in a review. Have you seen betterbidding? They have a list of the hotels in Priceline.... so much for anonymous sales that don't affect your bottom line. Sure, Hotwire isn't talked about much on T/A... because it's the same company and they censor it... but look up Priceline on T/A and you will see hundreds of reviews that mention it.
 

agoodman

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As someone who has installed res systems and been involved with 100-5000 room properties and managed multi property reservation departments you are missing a big point in WHY hotels do this - the room is sitting empty and is generating no revenue, and many times in larger (and larger can be subjective) rooms if you can sell another 10 or 20 rooms at $200 rather than $400 its better than empty rooms. Of course there are expenses associated with occupied rooms but the discounted rates are still covering those PLUS some $$
I just booked a $436 room for $165 for a friend who was going to DC on priceline and yes I reported it on betterbidding, and let me tell you she stayed 4 nights rather than less nights and spent a LOT on extras in the hotel, room service, dined in THEIR restaurants etc.
So although revpar may be down, occupancy % and bottom line are generally UP. And then those guests talk to other friends about what a wonderful stay they had and recommend it to others, and since you can't guarantee which hotels you get on Priceline with "name your own price", if the persons who heard about that fantastic hotel want to stay there, they can't use Priceline unless it happens to be showing as a named hotel.
Again, people are looking for VALUE more often than price.
Oh and I have to add that with the economy I have had to do some discounts and some long stays over the last 3-4 months but over those months even though my revpar was low, my income has MORE than been covering my bills which for me is better than sitting with empty rooms and a depleting bank account ... and not one person has "reported" that they were discounted because they appreciate it and it's a 2 way street
 

Generic

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As someone who has installed res systems and been involved with 100-5000 room properties and managed multi property reservation departments you are missing a big point in WHY hotels do this - the room is sitting empty and is generating no revenue, and many times in larger (and larger can be subjective) rooms if you can sell another 10 or 20 rooms at $200 rather than $400 its better than empty rooms. Of course there are expenses associated with occupied rooms but the discounted rates are still covering those PLUS some $$
I just booked a $436 room for $165 for a friend who was going to DC on priceline and yes I reported it on betterbidding, and let me tell you she stayed 4 nights rather than less nights and spent a LOT on extras in the hotel, room service, dined in THEIR restaurants etc.
So although revpar may be down, occupancy % and bottom line are generally UP. And then those guests talk to other friends about what a wonderful stay they had and recommend it to others, and since you can't guarantee which hotels you get on Priceline with "name your own price", if the persons who heard about that fantastic hotel want to stay there, they can't use Priceline unless it happens to be showing as a named hotel.
Again, people are looking for VALUE more often than price.
Oh and I have to add that with the economy I have had to do some discounts and some long stays over the last 3-4 months but over those months even though my revpar was low, my income has MORE than been covering my bills which for me is better than sitting with empty rooms and a depleting bank account ... and not one person has "reported" that they were discounted because they appreciate it and it's a 2 way street.
I didn't say that I didn't understand it, but it depends on when, how much and frankly, eventually will eat into revenue.
If a hotel is known to be on Priceline or Hotwire then people are reluctant to buy it online at full price. And frankly, it builds absolutely no loyalty to anything other than Priceline and Hotwire. Worse yet, when they start to discuss how much they paid to others, they get angry that they paid more.
The other side of this is the question of what you get. Under the law of unintended consequences you quickly see that bottom feeders are going into that market. Once you go under the 4* around here, among the hotels that show up on Hotwire and Priceline many of the hotels rank below 60th and down to below 120th. One that was so badly rated, they moved to specialty so they are 31st of specialties (they were below 120th at one time). Some hotels that I might stay at and a heck of a lot that I wouldn't put even my enemy at. And we haven't even gone to the question of location in the zone or even which room they give you. Someone has to be booked into that smelly room or we lose the revenue from it, might as well be the guy who paid the discounted rate!
As a B&B this just isn't viable. It's 25c on the dollar for people with no loyalty and a liability on the books for $1 going down to 50c (and in my case, forever, since they can never expire under our law.) And who knows if this is going to create loyalty. I am not a hotel, I don't have an infinite number of rooms that I can sell and I certainly don't want to fill my rooms at 25c on the dollar only to not make extra money. And where am I supposed to make that extra money... on hopes that they will then stay an extra day or two? Okay, so a $100 room nets me $25, two nights nets me $125, so $62.50 a night and a third brings this us to $75. But want to make a bet that Mr. and Mrs. are going to show up with two single night reservations to use a coupon each (and here, Mr. and Mrs. have different last names... because you keep your maiden name since 1981!) So, I have two nights at $25 each and they likely will block someone else who would have paid me for the room.
I have 155 room nights in March. Am I better off with 80 nights at $95.00 or 100 nights at $75.00? So 80 * $95 - 100 * $75 = $100 more in my pocket and 40 less breakfasts to expense, not to mention that much less work.
Of course, in Canada we aren't going through the same recession that you are. Except of course that our currency has gone up so much in value that it's hurting our tourism business.
 

EmptyNest

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here's the question - do you ONLY buy when something is "onsale"? Do you wait to take a vacation until it is "on sale"? Do you ONLY go into bedbathandbeyond when you have a coupon? Only buy clothes when they are on sale? Some people do, most don't, so saying that this will change the way consumers buy or "erode prices" is really not correct
It goes back to the concept of VALUE not price, if you are providing good value for money people will come. If you are not they won't. Or they may come once and won't come back. Now THAT has been proven over and over again..
How many people go to Retailmenot to look for a coupon before buying online? It is the 261st most important website in the US. Amazon taught people to look for coupon codes... and so people do. You are correct, many people buy without the coupons. Many people walk into a store to buy simply because they want it now and can't wait.
These services are meant to bring new customers who you want to buy from you in the future. And maybe it will work, but you are doing it at 25c on the dollar, with a 50c liability. Not to mention the fact that they can write you up as discounting in a review. Have you seen betterbidding? They have a list of the hotels in Priceline.... so much for anonymous sales that don't affect your bottom line. Sure, Hotwire isn't talked about much on T/A... because it's the same company and they censor it... but look up Priceline on T/A and you will see hundreds of reviews that mention it.
.
How much time do you spend on line?

I have never heard of half the sites you mention. I guess I am getting way too old because most of this stuff I don't want to deal with ....sorry.
 

Alibi Ike

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here's the question - do you ONLY buy when something is "onsale"? Do you wait to take a vacation until it is "on sale"? Do you ONLY go into bedbathandbeyond when you have a coupon? Only buy clothes when they are on sale? Some people do, most don't, so saying that this will change the way consumers buy or "erode prices" is really not correct
It goes back to the concept of VALUE not price, if you are providing good value for money people will come. If you are not they won't. Or they may come once and won't come back. Now THAT has been proven over and over again..
How many people go to Retailmenot to look for a coupon before buying online? It is the 261st most important website in the US. Amazon taught people to look for coupon codes... and so people do. You are correct, many people buy without the coupons. Many people walk into a store to buy simply because they want it now and can't wait.
These services are meant to bring new customers who you want to buy from you in the future. And maybe it will work, but you are doing it at 25c on the dollar, with a 50c liability. Not to mention the fact that they can write you up as discounting in a review. Have you seen betterbidding? They have a list of the hotels in Priceline.... so much for anonymous sales that don't affect your bottom line. Sure, Hotwire isn't talked about much on T/A... because it's the same company and they censor it... but look up Priceline on T/A and you will see hundreds of reviews that mention it.
.
How much time do you spend on line?

I have never heard of half the sites you mention. I guess I am getting way too old because most of this stuff I don't want to deal with ....sorry.
.
catlady said:
How much time do you spend on line?

I have never heard of half the sites you mention. I guess I am getting way too old because most of this stuff I don't want to deal with ....sorry.
You don't have to spend that much time online to start seeing these things in news reports! I think some of them may be 'Canada only' but they are popping up all over the place here. Had a call and an email from 2 different groups last week that are local to me.
 

Tom

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Rationalizing the 25 cents on the dollar sale by assuming that many vouchers will never be redeemed is a bad business strategy.
The cash value liability is possibly not well understood by the participating merchant. Read the "fine print" sections of coupon sites (e.g. L-S), which define the "paid portion equal to the amount your credit card is charged and similar to a paid gift certificate" and the promotional portion of the voucher. Under most state laws, the paid portion is a cash liability that cannot expire.
While the merchant is only paid a fraction of this paid portion by the coupon company, the voucher is considered a "deal" directly between merchant and customer, so the gift card obligation is the full cash paid out by the customer, not the discounted cash received by the merchant. The merchant is not obligated to reimburse cash (except below a small balance) and only has to offer services on his own terms. True, its terms of use may be restricted, but if sufficiently restricted, it may constitute fraud: The discounted room rate only applies on February 29. Selling vouchers expecting to not have to redeem them or changing a business name on sale to shed an apparent liabilty may also be interpreted as fraud.
the Slate article estimated `roupon revenues to reach "$2 billion or more this year" - that's roughly $1 billion of "paid portion" liability transferred to the ever hopeful merchant above any money he receives in return. I'll bet there will be lawyers involved soon, as there will ultimately be a sufficiently large and disgrundled class to represent: Do you have coupons that you never used? Those are worth cash! Call ...
 

Generic

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here's the question - do you ONLY buy when something is "onsale"? Do you wait to take a vacation until it is "on sale"? Do you ONLY go into bedbathandbeyond when you have a coupon? Only buy clothes when they are on sale? Some people do, most don't, so saying that this will change the way consumers buy or "erode prices" is really not correct
It goes back to the concept of VALUE not price, if you are providing good value for money people will come. If you are not they won't. Or they may come once and won't come back. Now THAT has been proven over and over again..
How many people go to Retailmenot to look for a coupon before buying online? It is the 261st most important website in the US. Amazon taught people to look for coupon codes... and so people do. You are correct, many people buy without the coupons. Many people walk into a store to buy simply because they want it now and can't wait.
These services are meant to bring new customers who you want to buy from you in the future. And maybe it will work, but you are doing it at 25c on the dollar, with a 50c liability. Not to mention the fact that they can write you up as discounting in a review. Have you seen betterbidding? They have a list of the hotels in Priceline.... so much for anonymous sales that don't affect your bottom line. Sure, Hotwire isn't talked about much on T/A... because it's the same company and they censor it... but look up Priceline on T/A and you will see hundreds of reviews that mention it.
.
How much time do you spend on line?

I have never heard of half the sites you mention. I guess I am getting way too old because most of this stuff I don't want to deal with ....sorry.
.
I have been using the "Internet" from before it was called the "Internet". When my first domain was registered, I was the 45th person with my initials. In short... I've been doing this for a long time (over 25 years).
 

agoodman

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This particular hotel has 500+ runs a 96% occupancy year round, they MAYBE give 2% of their rooms to priceline, I know this because a friend of mine works at HQ for that particular hotel group. They got a beautiful room on the 10th floor. The week prior I had been traveling with this friend and all 3 hotels booked on priceline. In every case I had great rooms
So VERY few people are coming in discounted, there were not even any discounted rates on their site for the days I booked.
Again as I always say this does not work for everyone but to say most people won't book unless they get a discount is just not true, in fact is has been proven otherwise with companies that train hotels and their sales depts how to sell, sell on value - ie explain to people why they are getting "value for money" ..... whatever the price may be
 

greyswan

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Here's a link from the wall street journal about the daily deal offerings: http://online.wsj.com/article_email/SB10001424052748704050204576218813288848414-lMyQjAxMTAxMDIwODEyNDgyWj.html
 

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