I read an article, a short while back, about how lots of people are using Groupon and other such online coupon/discount sites...and about how a lot of the small businesses offering discounts are really disenchanted with the way it's turned out for them. For some reason, small business owners are finding that they're actually losing out, instead of increasing revenue. How can that be?
I think I have a pretty good idea.
A family-owned picture frame store with three locations in the Bay Area offered the following deal: buy a voucher worth $40 for just $20. The fine print said the voucher did not cover anything but frames, did not cover sales tax, and that there were no cash refunds or store credits. Each voucher could only be used during one store visit. Fair enough. I pounced on this. $40 worth of picture frames for $20 plus tax? Hell, yeah. I bought two vouchers because I knew I'd need picture frames in my new apartment, and nice frames are expensive.
Yesterday I went to the frame shop with one voucher, and gave the other voucher to the friend I was shopping with. All they sell at this shop are frames and frame hardware. The initial tip-off that this was going to be an exercise in ineptitude came when the sales girl announced, pretty early on, that she didn't know anything about frames or frame hardware. Take that in. She's a sales girl at a store that sells nothing but frames and frame hardware, and she KNOWS NOTHING ABOUT FRAMES OR FRAME HARDWARE. What's more, she doesn't seem to feel badly about this, or see a problem with announcing it. My friend and I are were picking out frames for original art work, not for photos, so we had very specific needs in terms of frame type, depth and such.
Without any help from her, my friend and I picked out our frames. When it came down to picking out the hardware to secure our paintings to their respective frames, she repeated that she had no idea what any of it was for, how it was used, or how to choose the right hardware for specific types of frames. She called in another guy who knew a little bit about frames and frame hardware, but not much more than my 14 yr old nephew knows.
I picked a $30 frame. I also had a package of framing hardware that cost about $2. As per the fine print on the voucher and the terms of service I'd agreed to on Groupon, I expected to have the cost of the frame covered by the voucher, and to pay cash for the hardware and any sales tax. The sales girl stared at my voucher for a full minute, but somehow managed to NOT READ IT, because she said, "Your total isn't $40. I don't know if I can let you use this for less than $40 worth of merchandise."
I replied, "Are you joking? Of course you can. I just don't get any change back."
She said, "I don't know about that. I'll have to ask the manager."
I said, "But that's ridiculous. It's better for you if I spend the voucher on less than $40 worth of merchandise, since you don't give cash or credit back."
She didn't understand the concept and repeated, "I don't know about that. I'll have to talk to the manager."
"Well, you can't FORCE me to choose a $40 item."
"I don't know about that. I'll have to ask the manager."
She asked her manager, whose answer was, no...they would not honor the voucher is I had less than $40 worth of merchandise. I explained that I only NEEDED the $30 frame, and that I understood and was fine with the fact that I would not get change or a credit back. Impossible, I was told.....I HAD to have $40 worth of merchandise.
Ridiculous. Unbelievable. My friend passed me a cheap, little frame that I don't really NEED, just to make up the difference. The idiot sales girl then proceeded to include the big frame, the small frame, the hardware and tax in the $40 voucher. She triumphantly announced that I'd gone over the $40 voucher and owed them $1.10.
Again, take that in. She considered it a victory that I had to pay $1.10 in cash. She, and her manager, think they did a great thing for their shop by forcing me to pay $21.10 ($1.10 in cash, and a voucher I paid $20 for) for $40 worth of goods. They don't understand that they should have let me pay $20 for a $30 frame, and pay for the hardware and sales tax in cash. At the end of the day, not only did they force me to pay less for more stuff, but they paid Groupon a service fee for the privilege. I got $40 worth of goods and they got $21.10, minus Groupon fees. Unless their regular mark-up is 50% (and it isn't - it's actually a very reasonably-priced shop) this transaction COST THEM MONEY.
Small businesses may be pissed off at Groupon, but they need to look to their own ineptness before laying the blame on this whole online coupon thing not working in their favor.
For one thing, how the hell can a small business afford to offer several thousand 50%-off vouchers? Sears can do that. Target can do that. A small, family-owned, niche business cannot reasonably expect to do that and still turn a profit - especially not when they're paying a service such as Groupon to administer their discounts. I might walk in to Target with a 50% off coupon good for clothing, buy some PJs, and then end up spending another $75 in cash on groceries, toiletries, cleaning supplies, or whatever. But this is a frame shop. They sell only frames. I highly doubt people walk in, use their $40 voucher and then decide, "OMG...I need $600 worth of frames and I need it NOW!"
For another thing, how the hell does a business offer a deal without being well-versed in their own terms of service? I ended up paying only a small portion of the sales tax on this purchase, because the stupid sales girl included the tax in the voucher. A voucher is NOT MONEY. This store is going to have a hell of a lot of fun when it comes time to balance their books and reconcile their accounts for the IRS, because they're essentially NOT CHARGING SALES TAX FOR PEOPLE WHO USE VOUCHERS. The IRS will want that money, and guess who'll have to cough it up? The stupid frame store owner.
America is in a financial crisis. It makes a lot of sense to point to federal and state policies, corruption in government, and politicians from both major parties who don't give a damn about the average working man. On the other hand, business owners - especially small business owners - need to step up their game. Complaining to the Wall Street Journal that they feel duped by Groupon won't do. I'm guessing a lot of these business owners who are disenchanted figured they could offer and get paid up front for big discounts, and that most consumers would never actually use their Groupon vouchers. That's more than just dumb - its damned greedy. I don't hope the store where I had this experience fails, but I won't be shocked if it does. And, if it does, it can't blamed on a poor economy or TPTB in Washington DC or Sacramento. It'll be because the owner is both stupid and greedy - a dangerous combination.