Groupon Adds A Little Monkey Business From Merchant Gorilla’s Playbook

Groupon has run into a challenge figuring out how much hand-holding to do when it shows mom-and-pop Chicago businesses those essential steps of behind-the-scenes information gathering, a Groupon executive said Tuesday. In one case, Groupon, through its Groupon Works business, has enabled a 30-year-old Chicago mom-and-pop business to see its customers’ age ranges, communities and other key demographic information, said Sanjay Gupta, global merchant marketing vice president at Groupon, during a digital marketing conference at the Hyatt Regency. “The secret sauce at Groupon is that we’re able to deliver (small merchants) things they cannot get themselves because of their size,”” he said. Gupta said small companies are open to learning more about their inner workings, but they insist on value and trust. “We’re beginning to move (merchants) onto the web so they can manage their customer interactions themselves,” Gupta said.

Trust? Really? Let’s look at the facts:

•Groupon’s own business model is now shifting toward the repeat customer. This means that the list of possible businesses jumping into the social coupon pool is diminishing. So naturally they are offering more bells and whistles to their offerings in hopes of extracting further revenue from their increasingly dissatisfied and skeptical merchant base.

•Groupon does not share its own customer information with participating merchants. Deal purchasers are simply encoded numbers and it is still up to the merchant to extract the identity of the customer when they redeem their deal.

•Why would Groupon want to be completely transparent with its merchants and potentially cut themselves out of their own future business?

Analysts at Raymond James released a survey Monday showing one-third of Groupon’s merchants either unsatisfied or very unsatisfied with the Chicago company’s promotions, known as Groupons, and 39 percent unlikely to run another Groupon deal for the next couple of years. The top complaints were a high commission rate and a low rate of repeat customers, according to the survey report.

The Raymond James survey of 115 Groupon merchant customers revealed that only 4 percent of the merchants said their Groupon promotion was “highly profitable. Thirty-seven percent said it was slightly/modestly profitable; 26 percent said they broke even and 32 percent lost money on the deal.

Not exactly the formula for repeat business. Groupon stock debuted at $20 a share last November. Today it sits at $4.82. How’s that for a 75% off deal?

(Exceprts from 9.18.12)