Locals: Groupons Have Potential to Kill Small Businesses That Use Them

To the editor:

Half off a Christmas tree, a kayak tour, your favorite restaurant or a manicure and pedicure sounds great, doesn’t it?  We’ve all done it—taken advantage of the deep discounts that our economy is offering. 

Unfortunately, anyone who knows anything about business knows that there is a set profit margin for each industry, and when that industry falls below these numbers, it can only attribute deals like this to the advertising budget.

Feeling like everyone else was getting a piece of the pie and we were sitting back just watching, my husband and I decided in April of this year to run a Travel Zoo special at our business, in downtown La Mesa. 

What came next was a whirlwind of activity. Over Easter weekend in April our ad for a manicure and spa pedicure (reg price $80) was published under the “Local Deals” for a mere $39. (We were paid $23 from Travel Zoo to cover our expenses.) This is a luxurious 2-hour service for relaxation and maintenance, and was readily swept up as the latest “Deal of the Day”

The company that was mediating this advertising for us recommended that we do not put a “cap” on how many deals Travel Zoo could sell—saying that 400 was about the usual amount for such an offer.  On the evening of day number one of the three-day sale, I opened my laptop to see how many deals had been sold, and was astounded to see that already we were past the 275 mark.  I called my advertising manager, and he said that we were committed to go through the weekend.

We capped out at 700 deals. (We since do not deal with him any more!)  The phone rang off the wall for 4 weeks.  We hired another manicurist to accommodate all of the business, and for a little while I was pleased with the activity. 

The offer expired after six months, so of course those that put their voucher away and forgot about it called two weeks before the expiration date and demanded an appointment.  We did the best we could to give appointments all the way into January.  I had to hire another stylist/manicurist because I promised those that did all the work for the first six months they would be done when the coupon expired.

So what was the final outcome?

On the positive side, our salon and spa had exposure to an upscale clientele that had never been in our business before, and it kept some of our staff busy through the summer.

On the negative side, our employees were making minimum wage plus some tips (who can live in San Diego with that income?)  With payroll taxes, worker’s compensation, and the product we needed to purchase to do the services, we actually lost money.

We had hoped that the “come back” card we gave to each guest to get their hair done would bring other business into the salon, but that was only the case with about one half of  1 percent of those that got the manicure and pedicure. We relearned the big lesson that “coupon” people are just that—you see them once for the fabulous deal, and will probably not see them again.

Our call to action is this: First, to other small business owners: No matter how bad business is, go back to regular advertising at 10 percent or 20 percent off for a first-time guest. No more of the 50 percent or more off! 

And to the consumers: Although you love getting the deep discounts, please realize that if your favorite small business is forced to do this to get your business, they will soon be OUT OF BUSINESS, and you won’t have your favorite store or restaurant to visit any more.

Roz and Dan Oserin
La Mesa