osewalrus (osewalrus) wrote,

Groupon As Loansharkin?

This guest op ed in Tech Crunch argues that Groupon is essentially a scam that rips off small businesses and is also in emminent danger of collapse. I'm not sure I buy it. In fact, I'm fairly sure I don't.

For one thing, you can't complain in one breath that Groupon is imposing onerous terms on merchants by getting money up front for what amounts to advertising and then say Groupon is a scam because it is vulnerable to businesses not honoring their bargains. The way you address high risk is with terms that cover the risk.

There is a separate question about the value to the business that is using Groupon. The author has a point that it is hard to measure because the service is still relatively new. But the coupon model is fairly well established, so it is not unreasonable for merchants to try it out. It also seems to me that, like any mode of advertising, its effectiveness will vary from merchant to merchant. Some will likely acquire new customers, or make additional sales not covered by the loss leader discount, while others won't.

At the end of the day, what seems to anger the author is that -- as he says up front -- Groupon is little more than a new way to advertise, yet local merchants are flocking to Groupon while ignoring all the perfectly good traditional advertising the author sells.

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