In case you're among those who haven't heard of Groupon, here's a quick primer. Groupon, a Chicago-based "deal of the day" website founded by Andrew Mason, is a combination of the words "group" and "coupon." Every day, in cities around the world, the site sends out one coupon to subscribers in each market it serves. A coupon with a significant discount and a caveat attached -- if enough people sign up and agree to use the coupon, the deal will go through. If there aren't many takers, the deal falls through. After all, some businesses are only willing to slash 50 percent off their prices if they know they'll make a profit through volume.
As it turns out, 98 percent of the time the deal does go through, and a lot of businesses have been boosting their bottom lines by using Groupon. The large uptick in income has been a draw, and Groupon has managed to help a lot of local businesses gain exposure to new consumers -- beyond the one day they are featured.
Intrigued about becoming a part of this latest e-commerce phenomenon? Here are five things you need to know.
1. Make contact.
Obviously, to get on Groupon, you have to contact them -- if they don't contact you first. That part is easy. You can do it through the company's website and fill out the contact form here. Or call them at 877-788-7858, ext. 2. And you can learn more about how Groupon works at GrouponWorks.com.
2. Manage expectations.
Just because you want to be featured on Groupon doesn't mean you will. If you manufacture shoes or dog biscuits, and they're sold in stores across the country, good for you -- but Groupon can't help you out. If you sell insurance or you're a realtor, you may be a local business, but that isn't what Groupon is about, either. If you're a spa or a restaurant, now we're talking, but even you may have a tough time getting featured right away. "Variety is very important to us," Mason explains. "We don't want to be a business that runs spa deal after spa deal, even though they sell very well. We're not a spa site, we're not a restaurant. We're a city guide. We help people discover all kinds of places that they didn't know existed in their own city."
3. This is a partnership.
For every dollar a customer pays, Groupon takes a significant cut -- around 50 percent. "We say 'about half' because it really does vary, depending upon the size of the market and how much we expect to sell," says Julie Anne Mossler, consumer marketing manager at Groupon. "It can be slightly more or less than 50 percent."
Of course, you might understandably think, "I'm slashing my prices to half, and then I'm giving half of those profits to this company. What's in it for me?"
A big part of the reason that many entrepreneurs find Groupon worthwhile is that sometimes people will bring in their coupons and then end up spending additional dollars. For instance, if your restaurant offers a deep discount, you may not make much on the meal, but you may profit off of drinks at the bar. Or, if you have a garden shop, people may take you up on the great deal and get a lot of plants for a pittance, and then feel rich enough that they buy more flowers, trees or shrubbery. And no matter what, you're at least getting a description of your business in front of a ton of local potential customers, who may end up using your business down the road.
4. The check is in the mail -- really.
The day you're featured on Groupon, the money paid goes directly to Groupon. How do you get paid? They'll cut you a check. "Three installments within 60 days," Mossler says.
Ryan Colarossi, co-owner of The Egg & I, a Dallas-based restaurant and part of a regional franchise, confirms that he received three payments when he did a "buy $10 worth of food, get $20 worth" deal. "The first was immediate, the second a month later, the third, two months later."
5. Like a Boy Scout, be prepared.
Bloomberg recently suggested that Groupon may be a little too successful, noting that a coffee shop that expected to sell a few hundred discounted gift cards for in-store pickup was instead overwhelmed with more than 2,000 customers. So if you're going to take on Groupon, prepare. On the other hand, as Mossler stresses, "Businesses can set a cap prior to their deal going live, to ensure the volume of customers is a number they can handle. Our reps also keep an eye on sales the day of the feature. We always call the business to check in and see how they're handling the volume. Merchants can put a cap in place even after the deal goes live if it sells more than anticipated."
The Egg & I sold 400 Groupons in three hours. "The counter was moving so rapidly that I thought it was broken," says Colarossi, who co-owns the restaurant with his mother, Rose.
Rose summarizes the Groupon advantage in two words: "Excellent exposure."
The original version of this article appeared on AOL Small Business on 6/28/10.
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