Groupon business idea

[apricot]

Hi,

I want to check couple of things..

A few months ago i bought a yoga voucher from Groupon (fitness on fire .co .uk) . I went to Yoga place and it was a new opened, very small, not well trained teachers and it was clear the place opened just a few months ago. Money was wasted and i couldn't get return because the business exist and they provide service... but it was terrible.. anyway.. it was clear that the only way they get customers is through groupon or other daily deal sites.

Then the other day, I've seen shorts deal on KGB deal offered by Zahiki and i wanted to buy one. I've checked Zahiki website and i wanted to find out whether it is a Magento website or not as recently i am working on a website and i wondered how this website was built. So i typed, zahiki.com/admin .. and it took me to zenbedroom. com which was another magento website with groupon deal. Then i've done small check on zenbedroom it was linked to company called Wild Media with domain bodini and clouds memory foam.

I now understand that there are companies setting up websites and put products over priced and sell on daily deal sites as if they are discounted but in reality it's their normal price.

Is this legal to do? Can anyone do it?

 

[flare91]

Hello,

I'm certainly no expert, but remember watching a documentary on such a topic. I think the law states, that if you want to claim the product has a discounted price, then you have to have had the higher price for a fixed period of time in a certain period.

I think it was 21days of the day. So if were selling a mattress that is worth £300 and claim it is half price, it had to have cost £600 for 21days at some point that year.

Not sure of the exact time period, or the details, but I vaguely remember such a system.

 

[90DC]

Did you watch last night's Watchdog?

The problem with Groupon from a business sense is that you have to offer a substantial discount, then give Groupon 50% of what you make (Often more), you don't get the money until the clients are all happy with the product/service.

So, if you have a product that retails at £100 and costs you £50, you're not going to want to offer a 50% discount and then give Groupon 50% of what you make, so you increase the price of the product/service to something ridiculous, say £200, with a discount of 50% and then the 50% goes to Groupon and you end up with... £50.

The customers that come from Groupon style websites aren't the same as your normal customers, they're leeches, after a good bargain, and they usually complain more, want to drive a better deal etc. They can be very hard to please and potentially damaging to your business. And do you think these customers will show loyalty to that company when there isn't a deal on? Fat chance.

From a business sense, you'd have to be pretty desperate to offer Groupon or similar deals, when there are a wealth of other options available to you which result in larger mark ups on individual items sold, such as marketing, Facebook, Google Adwords etc.

 

[90DC]

Flare91

http://www.bis.gov.uk/files/file8127.pdf

1.2

 

[apricot]

Did you watch last night's Watchdog?


. They can be very hard to please and potentially damaging to your business. And do you think these customers will show loyalty to that company when there isn't a deal on? Fat chance.

.

Thanks 90C,

I was just doing more search about these websites actually and what i found is quite interesting. Seems like Bodini was kind of their first website and they have ridiculously high priced products and their marketing is not great, this is why easy to find reviews about Bodini and reviews are really bad.. Products are not delivered, customer service is unavailable, wrong product delivered etc etc.. there is a long a few forum about this..

However, it seems company maturer with Zahiki and they even bought zahikireviews.com domain and it's hard to find reviews for Zahiki because they created profiles on social networks and create link building as well. As you said the Groupon clients are not happy clients and they happy write reviews and probably that's why their first business didn't go well or they sold enough or something happened with Groupon now they come up with another brand.

I think this is a brilliant idea!!

I'll search for watchdog on Google now, I guess it was about this?

 

[apricot]

Flare91

http://www.bis.gov.uk/files/file8127.pdf

1.2

I think this wouldn't apply this business because this website would be created to generate sales only through daily deals sites. Therefore, price wouldn't be change at all. I think it's worthwhile to try

 

[flare91]

You should be able to catch it on BBC iPlayer. It was on last night, so should be posted up.

They did a little segment about KGB and other daily deal sites, and how customers were unhappy with the services re: cancellations, and refunds.

 

[apricot]

Thank you .. I've just watched it KGB part... I wonder if anything is going to change within daily deal sites though.. probably they make huge money from unredeemed products and it is unredeemed they keep the money.. I assume this is a bit revenue for them.. I used each daily sites once and I've never been happy.. I think this business will die very soon.

 

[flare91]

I think, as long as there are people who love bargains (everyone), these sites will continue to operate. Its not the fact that people are getting bargains, its the fact that people think they're getting a bargain.

I saw on groupon once that they were offering a designer suit for £590 knocked down from over £1000. Apparently, a few hundred people bought it. Something tells me they didn't really need a suit, and that if they didn't see that offer, they probably would have popped into M&S for a £50 suit regardless.

 

[KarlAustin]

I'd say it was fairly standard, there was an article (I forget where) where someone did some digging in to some of the deals on groupon and found that a lot of them were on domains registered just days before and the prices being charged were a lot higher than elsewhere on the net. I recall seeing one myself, for cheap no brand (could buy them off of Alibaba for £100) robot hoovers, they were selling for £200 "discounted" from £400 - you'd never of paid £400 for them, not when you can get Navitbot or Roomba for a lot less than £400.

 

[90DC]

I agree with Karl RE: Websites popping up with no make products at hugely inflated prices. I would be interested in buying as part of a 'group of people' if it happened where me and a group of, say 500 people wanted a certain mobile phone and used our 'buying power' to play one company off another to wiggle a few quid off for each of us. These websites exist, somewhere, but are less well known.

And Apricot, when the daily deals sites popped up, I thought they wouldn't last forever, but so long as people keep buying through them, they will be here, either in their current form or some other format. I've seen very few good deals listed on them and have never felt the urge to buy from them. However, the way they are set up, giving time limits and offering huge discounts triggers something in the minds of certain people, who then purchase, purchase, purchase through them, whether they need something or not.

 

[JamieM]

I think this wouldn't apply this business because this website would be created to generate sales only through daily deals sites. Therefore, price wouldn't be change at all. I think it's worthwhile to try

Yeah I don't think this would apply either as the retailer is not technically discounting the product. Groupon or whoever are selling a voucher which results in a discounted price.

I think it is perfectly legal but I don't think Groupon would necessarily approve of it. If the products can easily be found elsewhere at the same price it is not a good deal for Groupon to offer. They can be pretty selective.

 

[90DC]

I think it is perfectly legal but I don't think Groupon would necessarily approve of it.

Groupon may not approve of increasing prices, but I know somebody who works for another one of these companies actively tells people to alter their pricing structure to suit. Company policy? Debatable. Group buying industrywide? Who knows.

 

[JamieM]

Groupon may not approve of increasing prices, but I know somebody who works for another one of these companies actively tells people to alter their pricing structure to suit. Company policy? Debatable. Group buying industrywide? Who knows.

I think it will definitely go on to get the numbers right for the right deal but it will depend on the product and how widely available it is elsewhere. It's easier to inflate the prices for service related businesses for example.

 

[90DC]

I think it will definitely go on to get the numbers right for the right deal but it will depend on the product and how widely available it is elsewhere. It's easier to inflate the prices for service related businesses for example.

Yes, definately. With the service side of operations as well, the deals are geared towards upselling other products.

So, say for instance, you may sell a 30 minute photo shoot and an A4 print on canvas for £10, of which you receive £5 or less and to make up for it, you try to upsell other products.

The problem is, the people who frequent these websites are looking for a bargain, so wont pay what they'd describe as being 'over the odds' for additional services, so in the majority of cases, the upselling will not work.

 

[apricot]

.
giving time limits and offering huge discounts triggers something in the minds of certain people, who then purchase, purchase, purchase through them, whether they need something or not.

This is a great point 90DC. It's kind of an addiction for some people and even if they experience negative issues with daily deals sites - which i am sure they'll all do at some point - , they'll continue to buy. Actually, I've just found out something else about daily deal businesses.. After watching the watchdog and read this post , I've done one test ... I called up one of the hotel offering 2 nights stay at discounted price and I told them I want to stay in their hotel but I've seen their add on living social at discounted price and asked them if it is ok to get this discounted price directly from them so they wouldn't have to pay anything to living social. He jumped on it and said yes!

 

[90DC]

@Apricot

That's something I missed off. Definately, if they can avoid giving half to the group company, they'd do so.

There was a listing for a 2 night stay at a hotel I saw once which was listed as being say £99 instead of £219 and on their website "FOR 48HRS ONLY, £89" or something like that.

(I studied this group buying in some depth a while back, I've heard most things)

By the way, have yourself your first thanks for that last post.