People who are blaming the coffee shop owner are missing why this incident is bad for Groupon.
First of all, she acknowledges that it was her fault for not doing the math.
However, what she learned from the experience (besides losing $8,000) is that Groupon customers are worthless. They are cheap (duh) and they don't come back -- probably off to the next Groupon deal. [1]
These are not people you want in your restaurant. You want people who will pay full price and come back. Especially at a coffee shop, where there is not a lot of room to upsell someone who has $13 worth of store credit!
This is going to make it clear to small restaurants that Groupon works for places with fixed costs that can use price discrimination to get people in the door, but not well for them.
In fact, it gives me a startup idea: the OPPOSITE of Groupon. People pay extra for a limited number of guaranteed spots at exclusive establishments. Want dinner on Friday night at the hottest restaurant in town? We've got it, but it's going to cost you 25% more.
[1] I attended an event where 4 people bought $30 Groupons to a local bar for $10. They invited everyone they knew for Sunday Happy Hour and bought 120 $1 mimosas and bloody marys. We all ordered food, but those $1 drinks were already loss leaders. Assuming a 50% Groupon cut, the bar made $0.15 on each one. Did the food orders make up for that? http://www.flickr.com/photos/lukefrancl/4897720841/
>In fact, it gives me a startup idea: the OPPOSITE of Groupon. People pay extra for a limited number of guaranteed spots at exclusive establishments.
If exclusive restaurants wanted to do this, they could easily do it themselves. (The fact that they largely don't is interesting and much-studied by economists.) What value would your hypothetical startup provide them that they couldn't attain simply by raising their prices or charging extra 'table fees' for popular times?
Interestingly enough, Aviary (Grant Achatz's new restaurant in Chicago) will be charing more $ for more highly desirable reservation times. Curious to see how this will work out for them.
Comments
People who are blaming the coffee shop owner are missing why this incident is bad for Groupon.
First of all, she acknowledges that it was her fault for not doing the math.
However, what she learned from the experience (besides losing $8,000) is that Groupon customers are worthless. They are cheap (duh) and they don't come back -- probably off to the next Groupon deal. [1]
These are not people you want in your restaurant. You want people who will pay full price and come back. Especially at a coffee shop, where there is not a lot of room to upsell someone who has $13 worth of store credit!
This is going to make it clear to small restaurants that Groupon works for places with fixed costs that can use price discrimination to get people in the door, but not well for them.
In fact, it gives me a startup idea: the OPPOSITE of Groupon. People pay extra for a limited number of guaranteed spots at exclusive establishments. Want dinner on Friday night at the hottest restaurant in town? We've got it, but it's going to cost you 25% more.
[1] I attended an event where 4 people bought $30 Groupons to a local bar for $10. They invited everyone they knew for Sunday Happy Hour and bought 120 $1 mimosas and bloody marys. We all ordered food, but those $1 drinks were already loss leaders. Assuming a 50% Groupon cut, the bar made $0.15 on each one. Did the food orders make up for that? http://www.flickr.com/photos/lukefrancl/4897720841/
>In fact, it gives me a startup idea: the OPPOSITE of Groupon. People pay extra for a limited number of guaranteed spots at exclusive establishments.
If exclusive restaurants wanted to do this, they could easily do it themselves. (The fact that they largely don't is interesting and much-studied by economists.) What value would your hypothetical startup provide them that they couldn't attain simply by raising their prices or charging extra 'table fees' for popular times?
Interestingly enough, Aviary (Grant Achatz's new restaurant in Chicago) will be charing more $ for more highly desirable reservation times. Curious to see how this will work out for them.