Perils of Groupon

Pity the poor woman who recently faced financial ruin after 8,500 buyers took up her 75 per cent discount offer on a box of 12 cupcakes on money-saving website, Groupon.

Having under-estimated the popularity of the deal, Rachel Brown found herself losing up to £3 on each batch of cakes sold and having to pay out £12,500 for the extra costs of hiring agency staff and sending the products out, wiping out her profits for the year. There’s a lesson to all on-line retailers there – know your limitations and make sure you get the proposition right !

Groupon has received a mix bag of publicity since its inception. A relatively new phenomenon which has travelled across from the States, it is a fast-growing business which is said to save its customers up to 90 per cent off high street prices. It’s still only in its second year of business in the UK however there is already plenty of cautionary tales emerging which indicate that the overwhelming demand that the site creates is not necessarily a good thing.

My main gripe with it, from personal experience as a user on the buying side of the table, is that the deals tend to be pretty repetitive. I see so many spa breaks and cut-price colour and styling offers crop up that I treat the daily emails like wall-paper and delete without reading them. The few foreign holiday deals that flash up, which may spark a potential interest, are always not that good a deal once you have shopped around and seen what sites like Travel Zoo have to offer.

The latest complaints to filter through from the buyers are all the same and relate to over-subscription. There are many stories of spa days being impossible to book because the seller simply doesn’t have the capacity to meet the demand – not enough rooms, small facilities, too few staff etc. Unfortunately for the buyer, the money has been deducted from his or her card long before a date is set for the deal to be fulfilled and so they are forced to languish on long waiting lists with the other couple of hundred bargain hunters who thought they were onto a good thing.

Tempting though it is to aim the high-heeled boot at Groupon, I have limited sympathy for Rachel Brown from Need a Cake and her contemporaries. They are not giving us these ‘too good to be true’ deals out of the goodness of their hearts, they are hoping to win new business and cross-sell as the deal is being done. And that’s fair enough. I’ve got no problem with good enterprise. I do, however, object to poor customer service. Doesn’t matter how little these customers are spending, once you take the money, you have a duty of care. Rachel Brown almost went bust honouring that. Many others don’t.