GroupOn, LivingSocial engaging in questionable practices

http://techcrunch.com/2011/02/11/valentines-day-bait-switch-groupon-must-avoid-becoming-just-another-useless-coupon-site/#comment-144671358

by benwerd • 15 years ago

157 58 15 years ago

techcrunch.com

maukdaddy2• 15 years ago

This should come as no surprise to anyone who has a business background or has ever worked in retail.

I have no doubt their business will continue to be successful, as b&m stores are, but I have serious doubt about their sustained growth prospects as the newness of their model wears off. At some point Groupon is going to have to rely on the same sleazy sales tactics as b&m stores, which will turn off a majority of the early adopters.

RBr• 15 years ago

Something I learned from business and retail:

Groupon and their clones only need to pull these types of shenanigans to scale.

If they refine the model to compete largely with themselves, in the end, the company will win.

In order to do this, Groupon (or likely a smart clone) needs to break itself apart into niches and dominate the smaller markets that they are engaged in.

brown9-2• 15 years ago

For all we know what the TC commenter experienced could be one sleazy Groupon salesperson all on their own, trying to meet some sort of sales quota.

mrkurt• 15 years ago

Sleazy sales people are not uncommon when you have a sales process with incentives that encourage that kind of behavior. All the horror stories of car dealers, Yelp, and commission based retail can be attributed to "one sleazy salesperson", but that person doesn't operate in a vacuum.

travisp• 15 years ago

Even retail stores are somewhat limited in their ability to do this (not that some don't do it anyway).

As stated, it would seem to run counter to FTC section 233:

http://www.ftc.gov/bcp/guides/decptprc.htm

barista• 15 years ago

The fact that Groupon has to engage in such tactictss goes to show that they are hitting the limits.

IMO they were idiots not to take the GOOG offer. It was a huge one and I doubt they will ever reach that valuation again. Discounts like gropon never work I don't know many people who have give n the business a consistenty repeat busiinessafter going there first using a groupon.

The growth is staggering but not sustainable.

wccrawford• 15 years ago

It's not unusual to disallow coupons on the sale price of items. I admit that's questionable, but...

GroupOn didn't do this. FTD did. As far as GroupOn knew, everything was good, so far as I can tell. Throwing mud on their name without any proof at all is wrong.

maukdaddy2• 15 years ago

If you don't think Groupon knew about this, I have an awesome bridge to sell you.

nhangen• 15 years ago

It's also their job to know, so if they don't, it's almost worse.

notahacker• 15 years ago

The comments from merchants below the article are pretty revealing...

healsdata• 15 years ago

I had a similar experience with FTD when using a coupon code from the "My Coke Rewards" promotion. I imagine this is their standard operating procedure.

It's the only site I've used where you can't fill up your cart and then apply a coupon code. You have to start from scratch with a special URL that apparently changes the prices as you're browsing.

awj• 15 years ago

...yeah, not so much. It's GroupOn's responsibility to make sure that the deals they come up with aren't being totally negated by this kind of merchant shenanigans. If they knew or if they didn't, they still screwed up here.

aikinai2• 15 years ago

LivingSocial isn't mentioned in this article at all. Why are they included in the title of the submission?

vyrotek• 15 years ago

They were mentioned in the comments

aikinai2• 15 years ago

Oh I see. Thanks for the clarification.

keltex• 15 years ago

Another thing I've see (by a 3rd site... Homerun.com) is being added to their list when I've never even visited the site. Somebody in my contact list added me to their list and now I get their spam.

us• 15 years ago

The title of this thread should really be changed. First, I get that LivingSocial is of the same type of business and hence was mentioned in the title but then its more than just Groupon and LivingSocial.

Second, it's not Groupon that is engaging in the questionable practices. When you're going through massive deals like this, it can be easy to miss that the retailer you're doing business with is pulling a sly one on you. It's not uncommon to get a separate link and to think that some on here would believe that Groupon should thoroughly go through every link and verify for price discrepancy that may show up is unrealistic.

Lastly, it's also not uncommon for coupons to be honored on original prices rather than sale prices.

simonw• 15 years ago

I think you might have missed the purpose of the link - it wasn't about the TechCrunch story, it was about the commenter who claimed that a GroupOn sales rep had advised him to rise his regular prices before submitting a GroupOn deal that would offer money off, to maintain his profit margins.

WillyF• 15 years ago

Having had a Groupon shouldn't preclude a business from offering other promotions. Typically you can't combine a Groupon with another offer, so if a restaurant has 20% off Mondays and you use a Groupon, they'll probably charge you full price and then subtract the Groupon. If people are truly unhappy with the FTD deal, then I'm sure Groupon will live up to The Groupon Promise and happily refund them.

The comment that this links to is much more disturbing, but it happens whenever you have a huge sales team. The real question is whether deals based on inflated prices are actually being sold. That would be alarming.

acgourley2• 15 years ago

Look no further than the "2 dozen mini cupcakes for $25, normally $50, half off!!!"

It's happening all the time, perhaps from Groupon's suggestion, perhaps from the merchants' own machinations.

pchristensen• 15 years ago

Not sure what the cupcake deal you're referring to is, but the cupcake place by my house sells a single cupcake for $3.50, so $50 for 2 dozen minis doesn't sound completely off.

systemtrigger• 15 years ago

A Sr VP of a well-known sports equipment brand told me he was planning to create a new product for the sole purpose of selling it on Groupon - in order to maximize his profit margin. The product will be virtually identical to a competing product in his line.

garply• 15 years ago

I run a b&m store and this is common behavior. A store re-arranges an existing product so that it looks a little different, puts it up as a premium product with a very high price and for limited-time only, then offers that item, and only that item, for a Groupon.

llimllib• 15 years ago

What does b&m stand for?

edit: brick and mortar, the googles say

thwarted• 15 years ago

This is common. Sometimes it's done in a way so it doesn't pollute the main brand, sometimes it augments the main brand, usually it's cheaper and the has different margin metrics. A lot of things that Costco sells are like this -- I used to work at an online retailer that also shipped to Costco out of the same warehouse and we had a bunch of one-off brands that sold solely through Costco. You may have seen Converse One Star Chucks at Target. AFAIK, only Target sells the One Stars, it's the Target Converse brand, and they are significantly cheaper than regular Chucks but are almost identical visually. The main Converse brand is the All Star, which is sold through their regular shoe retail channels. They are in some sense competing with themselves on price, but they can still end up with the sale, because some portion of the demographic is more price sensitive than brand sensitive.

adrianbye• 15 years ago

yeah but costco generally gets very good deals in place; i've cross checked it numerous times.

once groupon management catches wind of this it will be fixed; they can't afford the damage to their brand

unshift• 15 years ago

that's how all of those black friday deals work as well.

barrkel• 15 years ago

It's funny - I went out shopping in the US on black Friday, as a holiday experience when visiting - and bought nothing, because I didn't think anything was a good deal.

wildmXranat• 15 years ago

Hold on, you mean there's a markup on those discounts?

portman• 15 years ago

FYI, this is a link to a comment, not to the story.

It can sometimes take 20+ seconds to load the comments, so here it is for anyone who is having trouble:

"when groupon called me and wanted to run a http://socialprintshop.com deal, their sales rep basically told me to double the price of my product for a month to make things work for me giving a 50% off deal. Living Social did the exact same thing, as did another deal site that reached out to me. Living social only required me to lower the price for 1 week after the deal ended."

-- benjaminlotan

benjaminlotan3• 15 years ago

wow, that's my comment thanks for posting to HN.

jdp23• 15 years ago

it was a great comment, and a great followup too, glad to see it here!

kin• 15 years ago

never heard of your site before, awesome idea! portman just scored you a sale. i'll be buying myself a poster soon (waiting for all the pictures of 90's cartoons to get updated)

mcantor2• 15 years ago

Suggestion: Show a preview whenever possible before asking customers to "Buy Now". I might have bought a Tumblr poster, but I stopped when I had to click "Buy Now" and still didn't know what I was getting! I might get one anyway, though. What a great idea.

jawartak• 15 years ago

'commited' should be 'committed'.

pitdesi• 15 years ago

Can you tell us details of how this has impacted visits to your site and the conversions? Random curiosity, nothing else. It would be cool if that comment made you a lot of money/buzz etc.

elvirs• 15 years ago

You can see 70% discounts on most boutique clothes and accessories shops and everybody knew that its not real but consumers still love even the illusion of discount and jump on them. Same with groupon, consumers are looking for illusions to spend money on, after all its not the product they bought that pleasures them but the feeling they get when they buy that product.

psykotic• 15 years ago

> You can see 70% discounts on most boutique clothes and accessories shops and everybody knew that its not real but consumers still love even the illusion of discount and jump on them.

It's straight-up illegal in every country where consumer protection laws have teeth.

If some people who live in countries with little or no consumer protection have been defrauded by businesses for so long that they have come to expect it as a matter of course, that's an argument that the practice is more than ripe for banning, not that it should be allowed to continue unhindered.

harryh• 15 years ago

Since when is it the job of the state to protect consumers from misleading advertisements in boutique clothing stores? This sort of thinking is what leads to the nanny state.

malloreon• 15 years ago

Reminds me of the scandals that plagued yelp when it was local startup of the summer

smallegan• 15 years ago

Retail stores do this all of the time, I don't see why this is any different. Is it not the responsibility of the consumer to spend his or her money wisely? More and more it seems like the consumers are following the mantra of it's not what you SPEND it is what you SAVE...and with the advent of social buying it is giving lazy deal seekers a great way to "SAVE" every day :-P

yatacc• 15 years ago

word on the street is that Gap-Groupon deal worked out horribly bad for Gap. They were hoping people to spend more than the 50$. And it seems that a very,very small number actually did that. Majority limited their purchases to very close to the coupon amount. I doubt if Gap will be doing a Groupon again.

jasonmcalacanis• 15 years ago

Such a lame link-baiting story. These kind of things happen all the time... it's channel conflicts and speed errors typically--not malice.

Look at the headline, look at the author.... it's manufactured link bait.

let's move on and talk about an important startup launching something cool. techcrunch is lost and adrift.

benjaminlotan3• 15 years ago

actually i didnt post this to HN... i just commented on techcrunch and i had no idea that this response would happen. If you read my comment it's pretty relevant. Just saying.

MatthewDP• 15 years ago

Not to mention you can always get 20% off FTD if you do a google search for a coupon.

endlessvoid943• 15 years ago

How is this questionable? The business owner is always free to refuse. Always.

endlessvoid943• 15 years ago

Downvoted with no responses?

mcantor2• 15 years ago

I think you're getting downvoted because "they're doing something skeezy" and "prospective partners are free to refuse" are orthogonal. If I walk up to a random person on the street and ask them what their credit card number is, that's questionable & skeezy, even though they can just tell me to buzz off!

webXL• 15 years ago

Well, they're making it up to me:

Hi Matthew,

Thanks for your interest in the FTD Groupon.

We try to offer the best deals possible, while also making sure all of the details are up front and easy to understand. The deal’s original terms were that the Groupon could not be combined with other offers and discounts. For sale items on FTD.com, this meant that you were not able to realize both discounts. We understand that is confusing and upsetting to a number of people—especially since you expect a great deal from us every time.

To make this right, we’ve worked together with FTD to make sure that discounts available on FTD.com will now also be available to use with your Groupon. For those of you who already purchased items that were on sale on FTD.com, FTD will automatically issue you a refund on the credit card you used with the difference as additional savings. Please allow 5-7 business days for this to show on your statement.

We’re really sorry for any confusion this deal has caused. This resolution should now ensure that you get the maximum value for your FTD Groupon, even if you’ve already redeemed. We hope this resolution is to your satisfaction.

smokey_the_bear• 15 years ago

It depends on the business type, but I'd suspect most business owners are savvy enough to know it won't help them acquire customers. I got a groupon to eat at a restaurant in Berekley, $10 for $25, and either the prices were specifically marked up to combat the groupon, or the owners are suffering some delusions of grandeur. Either way, the food was good, but it wasn't worth 40/person, and I won't go back.

GroupOn, LivingSocial engaging in questionable practices

Related Stories