This holiday season, small retailers are leaving Groupon off their lists as far as sales strategy goes.
Thisshopping season is the biggest one of the year, and small businessesoften rely on sales made during this period to bring them into the blackas the year comes to a close.
A sales strategy that didn't workduring the rest of the year is out of the question for the holidays,says Pamela Springer, CEO of online small business network Manta.
Thisdoesn't bode well for Groupon and other daily deals sites. Only 3% ofretailers got repeat customers out of daily deals promotions, accordingto a survey Manta released Oct. 30.
"They're doubling down onthings that work, and leaving things that are less proven or they've hadexperience with and didn't work off to the side," says Springer.
Ifbusinesses aren't getting repeat customers out of Groupon deals,they're losing money, says Anthony Bruce, CEO of retail data analyzerApplied Predictive Technology. Groupon often charges businesses as muchas half the revenue of a deal sale, which is usually a drastic discountalready.
"If there are future purchases that occur because of aGroupon, that's great," says Bruce. "If it's an incremental visit Iwouldn't have gotten anyway, it's bad. If it's a visit I would havegotten anyway but did it with a Groupon, that's terrible."
JenniferUntermeyer says she won't use Groupon this holiday season, because shelost money on the five daily deals she ran last year for her business,TravelKiddy, an online store that sells toys and games to keep kids busyduring road trips or plane rides. She ran her first $10 deal for $20 ofmerchandise on Eversave last November, trying to snag some holidaytravelers, and ran four more similar deals on niche mom-themed dealssites, hoping to score new customers.
It didn't work.
"Wecan tell how many people we've had repeat, and it's eight or nine out of3,000 deals," she says. "We ended up in an overall loss, even factoringin the marketing benefits."
Groupon sales chief Kal Raman saysGroupon helps businesses retain customers through its Groupon rewardprogram, which is sort of like a frequent-flier program for customers.The program helps businesses track purchases a Groupon customer hasmade, and after a certain level of spending is reached, Grouponautomatically sends the customer a free deal.
"We effectivelybecome their loyalty-management company," says Raman, who sees Grouponas a great way for retailers to sell inventory they'd otherwise besitting on. "As a small-business owner, you can aim high, and we canhedge that risk."
Will Ander, senior partner of retail strategyfirm McMillan Doolittle, says liquidation is the only good thing Groupondoes for small retailers. "It's more effective than giving it to theSalvation Army."