Word comes that Groupon has pulled its controversial ad campaign featuring famous stars selling out on big causes – things like deforestation of Brazilian jungles, and self-determination of the Tibetan people – in exchange for big discounts at restaurants and the like. I’d provide a link to some of the ads, but Groupon has already made them hard to find online. But here’s a parody by Conan O’Brien that gets the point across:
Groupon still insists on calling the campaign “quirky” – implying that it’s somehow everybody else’s fault for failing to see the humor. But it wasn’t quirky; it was horrifying and illuminating.
Illuminating in the way that Amy Chua’s parenting memoir, Battle Hymn of the Tiger Mother, shed light on the insecurities of American parents. Horrifying in the way that hatred of former BP CEO Tony Hayward is so easily bent into self-loathing for the demands we put on oil companies to keep finding new supplies of crude at any cost.
What really killed Groupon’s ad campaign is that it revealed something Groupon users would rather not admit: They’re just fine selling out a few million Tibetans if it means getting 50% off at their favorite Chinese restaurant.
The fact is, if you like the restaurant so much, it’s in your best interest to pay a fair price for a good meal. Or do you really think the restaurant business is so profitable that half price is fair?
There is a Cleveland Heights/University Heights angle to this. Groupon is popular here, and I know a number of local merchants who have used it – some successfully, others not.
Here’s how Groupon works
A merchant comes up with an big offer – like 50% off dinner or a massage or a bouquet of flowers. When people pay for the coupon, Groupon keeps half the money and sends the other half to the merchant. So, if a bouquet normally costs $60, the merchant is now taking in $15 for doing a lot of work, and Groupon takes in the same $15 for doing very little.
Sounds good, right? Except that $15 probably doesn’t even cover the cost of the flowers, let alone rent, insurance, payroll, taxes, etc. So why do merchants use Groupon? After all, nobody is forcing them.
- To bring in new customers to sample their goods and services, in the hope of converting them to regular, full-price customers.
- To fill excess capacity (like empty space in a yoga class), or to get rid of goods that are growing old on the shelf and need to be sold fast (like flowers).
So here’s the local angle: One of the things that gives the Heights its character is the variety of independent stores that provide goods and services you can’t get everywhere else.
The people who own these local businesses tend to live locally too. They employ people from the Heights; they spend their earnings at other merchants in the Heights; they contribute to fund-raisers for kids in the Heights; they participate in non-profits and important causes in the Heights.
Could they continue to do all this for 25 cents on the dollar?
I talk to a lot of independent merchants here – especially in the Coventry, Lee Road and Cedar-Fairmount neighborhoods. They want to look prosperous and lively, because that’s good for business. But the truth is that even the best and most established merchants are struggling. That’s what happens in a hard-hit city in a hard-hit region in a hard economy.
So merchants are trying to be creative in their effort to attract new customers. That leads some of them to Groupon, which I suspect does more harm than good.
The problem isn’t that Groupon offers ridiculous deals; it’s that Groupon institutionalizes them. People come to expect a $60 bouquet for $30, or a nice restaurant meal for $15. They won’t pay full price for these goods, because they know Groupon will offer another half-price deal from someplace else. So while Groupon claims it helps businesses grow, it’s long-term effect will be to reduce the perceived value of what the businesses offer.
There is a precedent for this. My first 10-speed bike came from the old Al’s Bicycle Shop (Lee and Euclid Heights Blvd.) for $129 in roughly 1975. Thirty-five years later you can buy something that appears comparable for $79 from any big-box store.
Hidden in that low price is the fact that companies like Wal-Mart have already done what Groupon’s ads so proudly claim; they’ve given us unbelievable deals by selling out on little things, like U.S. manufacturing jobs, living wages for their employees and involvement in their communities.
Groupon’s genius is that it’s doing the same thing, but without going to the trouble of building thousands of stores and creating global supply chains. It has managed to enlist small and independent merchants to handle that heavy lifting.
I’m grateful for these small businesses. I like the services and products they provide, and I like that the owners are my neighbors and friends. Thanks to Groupon’s revealing ad campaign, I think full retail is a pretty good deal.