Will Your Margins Support a Groupon Deal?
On the face of things, exposing your business to Groupon’s large number of subscribers may seem like a can’t-miss proposition. Before you get too excited, though, you need to have a clear understanding for how the deal works. Typically, Groupon offers consumers a deal that is half off of the regular price. Right there, your profits are cut in half. If the deal goes through, Groupon pockets half of the earnings – your profits shrink down to just one-quarter of their original value. Can your margins support that type of deep discount, even if it involves decent volume?
There’s No Rush
As a retailer, you most likely don’t have to worry about expiration dates and things of that nature. Restaurants flourish when using Groupon precisely because they need to move perishable goods quickly. It is in a restaurant’s best interest to use up all of its ingredients rather than chucking them into dumpsters. As long as your business doesn’t involve perishable items, there is no pressing need to rush into a Groupon deal. Take your time and consider all of the angles.
Run the Numbers Carefully
Don’t give in to pressure tactics when negotiating a Groupon deal. Take as much time as you need to crunch the numbers. When all of the math is done, you should feel confident and satisfied about what the deal will do for you. If you are on edge or concerned about how such a deal will affect your business, you might want to reconsider. Until you sign the actual contract, you are under absolutely no obligation. If math isn’t your strong suit, turn the information over to an accountant or to someone who is adept with working with numbers.
Large Margins Equal Great Opportunities
If you run the numbers and discover that you have comfortably large margins, Groupon could indeed end up being a fantastic opportunity for your business. Remember that the deal isn’t necessarily just about giving you a huge sales day; it’s also about spreading the word about your business. Groupon casts a very wide and influential net on your behalf. They throw all of their advertising might into promoting your business, even if it is just for a single day. You could earn many new customers through Groupon, which will serve you well in the long run.
Negotiate, Negotiate, Negotiate!
One thing that you need to know about signing up for a Groupon deal is that the sales reps work on commission. Therefore, it’s in their best interest to sign you up for the deal that is going to be the most profitable for Groupon. You need to stand your ground and negotiate as much as you can. Remember that the sales rep wants to make the sale; the odds of the whole thing falling through are quite small. In most cases, the rep will probably start off with a deal that is very bad for you. Negotiate your way to a deal that you are truly comfortable with so that you don’t end up with any regrets. Also, remember that you can negotiate a cap on how many people can buy the Groupon. While Groupon may not run promotions that have a very low cap, if you’re concerned about an extremely high volume of Groupon customers this is something you can negotiate.
When Groupon works well for a retailer, the benefits can be enormous; when it backfires, the consequences can be dire. If you are constrained by very tight margins, proceed with a healthy dollop of caution. Sure, it would be great to expose your small business to a larger audience. However, you shouldn’t do so at the expense of your bottom line. If everything works out the way that it should, you will end up with a deal that won’t propel your store towards bankruptcy. You will also have a great opportunity to spread the word about your business to an exciting new audience. If it all pans out, you will be glad that you did it.