The Collapsed State

Daily Mail (London) December 15, 2011 Byline: by Tom Rawstorne FOR six months, Chris Harman’s pub has been packed to the rafters. Almost every night, all 35 seats have been taken, and his chicken liver and Cointreau pate, his marinated lamb kleftiko and his black tiger prawn stir-fry have been hugely popular.

Good news, one might have imagined, in such straitened times. But Mr Harman, 53, is not happy.

Which is hardly surprising, given that he has pocketed a paltry [euro]6.50 a head for the privilege of serving his award-winning food (glass of wine included) to some 750 of those customers. ‘I am exhausted,’ he explains. ‘Everyone in the trade is struggling as it is, but what has happened to us has ruined our whole year. I wouldn’t wish it on our worst enemy.’ What he is referring to is Groupon — the biggest player in a phenomenon that has turned many of us into professional bargain hunters.

The system works as follows: subscribers log on to Groupon’s ‘deal-a-day’ website where they can buy a voucher that offers a number of daily discount deals on anything from restaurant meals to spa treatments. The US-based company uses collective buying power to negotiate bargain-bucket prices with retailers, which become available only if a minimum number of people sign up. see here groupon atlanta

Even though Groupon takes up to half the price of the vouchers, the retailers and restaurateurs participate in the belief that it will help them gain new custom.

AND so it was that Mr Harman found himself signing up earlier this year, after a Groupon representative dropped into his pub. ‘She explained how Groupon worked, and I agreed to do an offer for customers at the cost price of the food,’ he said.

This meant a two-course meal for two with a glass of wine each for [euro]26 instead of the normal price of [euro]68 — a discount of more than 60 per cent. Of that [euro]26, the pub would take [euro]13.

‘The idea was that we would attract new custom and provide the opportunity for repeat trade,’ says Mr Harman. ‘We thought a few hundred people would take up the offer and then come back at a later date and pay the full price.’ But within hours of the advert going online, Mr Harman, whose pub The Six Bells is located in a village in Berkshire in the south of England, could only watched in horror as the numbers signing up quickly headed past 500.

In panic, he tried to call Groupon to get them to pull the offer but because it was a Sunday he couldn’t get through. By the time he had managed to speak to someone the following day, some 750 people had already paid for a voucher to have a bargain meal at his pub. What’s more, rather than some of these people becoming regulars, as he hoped, the publican says that only one couple who used the Groupon voucher has returned for another meal. And what about all the hopedfor additional sales of extra drinks and side orders? ‘There were none!’ says Mr Harman. ‘The people just come in, eat the food, have their glass of wine. They won’t even pay for another drink — they’ll ask for a glass of tap water.’ However, while the Groupon concept certainly raises a dilemma for businesses, it can work. According to Groupon’s website, 91 per cent of businesses who have signed up say they would like to be featured again.

And yet for some, the cost remains too high. Hannah Jackson-Matombe runs a successful company called Spotless Organic, a green cleaning company that specialises in high-end domestic and commercial properties. Previously, she had successfully advertised discounted offers with similar ‘group-buying’ companies, and thought Groupon (the biggest player in the market) would help spread the word about her company. But she was shocked by its sheer power. She says: ‘We realised to our cost that we became Groupon slaves.’ SHE feels that people like her do all the hard work while the Groupon bosses sit back and collect an unfair share of the profits. For example, Mrs Jackson-Matombe says she used Groupon to offer an oven-clean service for just [euro]22.50, of which she would take [euro]11.25. The normal cost was [euro]115.

Although she initially wanted to reduce this price by just [euro]30, she says she was persuaded to drop the price further to make it more attractive.

She says Groupon suggested the [euro]22.50 per ‘oven scrub’. ‘I feared it would be too cheap but they told me that once I had done the oven scrub, I would be able to sell customers another service,’ Mrs Jackson-Matombe said. ‘I thought it would make good business sense.’ Mrs Jackson-Matombe says she asked for the deal to be put on Groupon’s website for just 24 hours. But she claims it stayed on for longer — despite her contacting Groupon to complain — by which time 300 of the deals had been sold. Her staff have now cleaned 200 ovens, and she estimates she has lost [euro]42 on each one. As for attracting repeat business, she says she has not had any at all.

Customers who buy a service through Groupon pay the firm directly. The agreed share of the money is handed over once the voucher has been ‘cashed’ in and the service delivered. There have also been claims that it can take weeks for Groupon to release the money.

What stands out from the experiences of the companies swamped with Groupon orders is their dogged determination not to let down those who have purchased the vouchers, whatever the cost to their business. They know that failure to honour the vouchers could actually mean their reputation is damaged rather than enhanced. But for some, the sheer scale of the take-up means it is impossible to meet demand.

Alan Oxlade and his wife Wendy run a pub, The Shoulder Of Mutton, in the south east of England. They recently ran a [euro]25.50 meal-fortwo deal on Groupon and ended up with 1,103 people taking up the offer. The pub has 15 tables and is open only in the evenings, with Fridays and Saturdays already booked up by paying customers. The deal was valid for just three months. this web site groupon atlanta

‘Even if we filled the whole pub every night to capacity with people redeeming vouchers, there would still be hundreds of people — regular punters and those who had bought vouchers — unable to get a table,’ said Mr Oxlade.

However, following discussions with Groupon, the company has now agreed to offer full refunds to anyone who cannot be accommodated.

Even so, Mr Oxlade has already had to field complaints from unhappy voucher-holders.

Defending her firm, Groupon’s international communications director Heather Dickinson says: ‘We offer local businesses the opportunity to expand their customer base. ‘Partners who choose to run a deal with Groupon are provided with support and advice that help them drive the best return on investment for their businesses — a bespoke process — and our managers provide custom assistance before, during and after the deal to ensure partners achieve their goals. We often make recommendations on capacity, including offering a deal cap.’ While the Groupon phenomenon has revolutionised business for some, those over-run pub cooks have found they have got their fingers horribly burnt.

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Cost: Cleaning boss Hannah Jackson-Matombe, and publican Chris Harman, top