I have purchased a number of ‘deals’ through Groupon and I have enjoyed each and every one. I scan Groupon daily in order to see what the offers are, both locally, and across the Country. Recently I bought a deal that was advertised for Mother’s day from Need A Cake. The deal was 12 cupcakes for £6.50 instead of £26.00 – this was a great deal, I thought, and one that was advertised throughout the Country, thousands of people had purchased this deal. However, it was through purchasing this Groupon deal that my concerns for this global online force, started to grow. Let me explain…

I wanted to order these cupcakes for delivery on Mother’s Day but when I tried to activate my Groupon voucher for my order the website told me that the their was a website malfunction. I called the company behind this deal, Need A Cake, who explained to me that so many people were trying to order that their website was having problems and it will be sorted soon.

A day later the same issue arose, however, this time when I tried to call the company it just rung off the hook. At times I rung and there was no answer, at other times I rung and it was engaged, clearly other people were trying to get through also. I then went over to the companies Facebook page were there were a number of requests for anyone to come and help them prepare these cakes for Mothers Day delivery. Basically, there were so many orders that they could not cope with the demand. I had also noted, on their Facebook page, that a number of people had commented that they had tried to contact the company with regards to not being able to get their deal and then, these comments were deleted. I then found a mobile number for the company on the Facebook page and gave them a ring.

The lady that I spoke to was the same lady I had spoken to a few days before, she was clearly in the shop and in the background I could hear the ‘phone ringing off the hook, no one was answering it. I had asked why the website was not taking orders and, at first, she explained that the website was fine and there was no issue. I was then told that too many people were using the site and then I was told that Groupon controlled the site and so I would have to speak to them. Of course Groupon didn’t run their own website. Need A Cake were literally overloaded with people wanting their cupcakes, they could not handle the response. It is my assumption, and therefore, it is not fact, that the company actually stopped their website from taking orders so that they could try and manage the orders that they had got. In terms of their customer service they categorically blamed Groupon.

I then noticed a deal on the Groupon site for a local restaurant. This is a lovely little Greek restaurant that has an excellent reputation in the local area. The deal was a 3 course meal, for two, for £15.60 instead of the usual £39. However, when I read the terms and conditions of the deal I was quite astounded.

When the deal closed 1481 meals had been purchased. The description of the deal explains that there are 37 tables in the restaurant. The terms also explain that the deal EXPIRES on the 30th May 2011, it excludes bank holidays and Mother’s Day. I also talked to the owner on the ‘phone and he added that Saturday’s were also excluded because he has to find tables for his regulars.

Excluding bank holidays, Saturday’s and Mother’s day there are a total of 46 days from the 1st April until the 30th May for a total of 2962 diners to eat their 3 course meal using their voucher (excluding regular customers). There are a few obvious problems here:

1) Over the period of 46 days a full sitting of 37 seats have to be used, every single day, in order to ensure that everyone who purchased the deal can have their meal. Please note that this does not include regulars to the restaurant and it assumes that everyone who has purchased the deal has availability in the diary.

2) With Groupon the merchant gets 50% of the sales value. The retail price of the 3 course meal is £39 and the Groupon deal is £15.60 so the restaurant will be getting £3.90 per person for a 3 course meal. My assumption is that they will be barely making a profit on this, if any whatsoever.

Going back to the conversation that I had with the owner of the restaurant he explained that he had asked Groupon to limit the deal so that only 500 purchases could be made, but Groupon wanted to increase the profit as much as possible.

The premise of Groupon is that it is raising the profile of small local business and therefore increasing their revenue through future repeat orders. My suggestion is that, although this is Groupon marketing spin, the actual reality, for a good number of small businesses is that Groupon is making these businesses suffer by operating at a serious loss for the period that the deal is live and is destroying the reputation of these businesses in both the eyes of regular customers and those who hear about the deal through Groupon. Finally, it is undoubtedly causing stress for businesses owners, such as the case of We Need A Cake, who simply cannot cope.

I would love to hear your thoughts on Groupon, whether you are a customer or a merchant?