Is Groupon Right for Outdoor Companies?

Mar 16, 2011

Topic: Business

If you haven’t heard of Groupon, your customers have. Forbes magazine dubbed the group discount site “the fastest growing company ever.” Groupon famously declined a $6 billion buyout offer from Google. Not even a poorly received Super Bowl ad campaign slowed down the company, which has recently expanded to dozens of countries in Europe and Asia. Similar sites, such as LivingSocial and Dealster, have proliferated.

The idea behind Groupon is simple: each day a local company offers a new, limited-time-only “group coupon” voucher. The participating company must provide big discounts, usually between 50 and 90 percent. The offer kicks in only when enough users commit to it. Groupon claims that everyone wins — customers get a great deal and companies get lots of customers. Groupon gets a big cut of the proceeds for its part in the equation; usually the site takes 50 percent of the voucher revenue.

But should you do a Groupon deal? The latest issue of Outdoor USA Magazine asks whether coupon deal sites are right for outdoor companies. Their answer: yes and no. The appeal of a burst of customer activity, particularly during a slow sales period, or the expansion of customer demographics, as more than three quarters of Groupon users are female, can be great. But there are risks, according to an editorial in Outdoor USA Magazine: “When [you] start down the discount path, customers consciously or subconsciously tend to wait for the sale they know is coming”.

The Outdoor USA Magazine article profiled the Groupon experience of two outdoor retailers: Next Adventure of Portland, who offered a 50 percent discount on a three-hour kayak tour, and Midwest Mountaineering of Minneapolis, who gave $10 off a $20 merchandise purchase. Both considered their Groupon experience a success and may use the site again, but with some caution. Next Adventure found that they inadvertently displaced some full-paying customers during a time that they were most likely to get them. Midwest Mountaineering learned that most customers who used their voucher spent just a fraction over the $20 minimum.

Here are a few things to consider before using group discount sites:

  • Be wary if you don’t have the capacity to properly handle a big influx of new customers. A successful Groupon can generate hundreds or even thousands customers in a short time.
  • Be mindful of your current customer base, as they are the ones already paying full price. You don’t want to make it difficult for them as you accommodate a large influx of discount customers.
  • If you are new in town, Groupon can be a great way to generate buzz. For those running special events, it can be a great way to sell tickets in a short time.
  • Running a Groupon during the slow season can keep your business busy during traditionally underperforming timeframes.
  • Returns can be a challenge. If you offer a $50 voucher, the receipt may denote only the remainder — whatever the customer paid over the voucher. If someone bought a $51 backpack, they would only have a receipt for $1. Make sure your systems can handle these issues.