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Why Running a Groupon Won't Save Your Business

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When you get right down to it, Groupon's meteoric rise from startup to phenomenon has made the act of running a group deal sexy for businesses.

It might be tempting to run one just out of some desire to keep up with the competition or even for bragging rights -- but a new report from istockanalyst.com says doing so for those reasons would be a big mistake.

There's been a lot written about how unpredictable running a Groupon can be for a business (even the MLB can't count on its influence for a successful deal), and as the service has gotten more commonplace, it's become clearer what its primary role should be for companies: to raise awareness, not raise money.

istockanalyst.com's story elaborates thusly: 

Consider that the Gap recently offered a Groupon for $50 worth of merchandise at $25. The Chicago Tribune reported that a whopping 445,000 Gap Groupons were sold. Sound like a savvy way to bring in new customers and boost sales? According to author Bob Phibbs of Groupon: Why Deep Discounts are Bad for Business, retail sales reports showed that this decision may have directly contributed to an 8% loss that Gap showed soon after, leading to the exit of Gap's CEO and marketing director, and having a negative impact on the company's stock! This type of scenario is not limited to Big business: small businesses have been affected too. Consider Posie's cafe in Portland, Oregon. Three months after offering a Groupon coupon, the owner could not meet payroll after losing $8,000 in profits from the discount offer! 

There are more sobering statistics revealed, too, like 32 percent of the companies surveyed said that running a Groupon was unprofitable and that a 50-percent off deal dissuades customers from coming back once prices go back to their normal level.

You get the idea: running a Groupon is risky. Know what you're getting into before hopping onto the bandwagon.

Read the full story over at istockanalyst.com.

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