Is Groupon Bad for Business?

Groupon is the hot new thing in e-commerce, and a quick check shows many jewelers signing up. But this article quotes retail experts that argue it’s a bad thing:

“Coupons and all of these things are like crack cocaine,” said Laura Ries, co-author of “The 22 Immutable Laws of Branding” (HarperCollins) and president of Ries & Ries, an Atlanta, Georgia-based brand consulting firm.

“That first high is fantastic,” she said. “It becomes very difficult once you get consumers into that pattern, into that habit where they won’t go without the coupon. Like drugs, the best way to avoid the problem is not starting to begin with.”

The overuse of promotional deals puts companies on a downward spiral toward erosion of their brand and operating margins that eats into long-term profits, said Ries, pointing to the airlines and department store retailers as culprits who have suffered from this pitfall.

Groupon is interesting because a “group” has to agree to the deal, so, like the “flash sales” sites that offer discounted goods for a limited time, the deals have an aura of specialness. But the article notes that it sometimes drives so much business towards companies that they end up overwhelmed and have to give sub-par service. Which shows, I guess, that there will always be some truth in the adage, “you get what you pay for.”

Be interested in hearing people’s experiences with Groupon, which has a certain relevance to jewelers because it’s oriented towards local merchants. Obviously, it can boost business. How much of that is just a one time thing? All these sites claim they are helping to build people’s brands. But the only brand they are building may be their own.

JCK News Director