Groupon deal tanks Mt. Airy business
January 11, 2012By Alan Tu
Food for All Market at 7127 Germantown Ave. begins a liquidation sale today after a disastrous experience using Groupon.
"I lost a lot of money when I did Groupon," owner Amy Kunkle said. "I just had a lot of difficulty recovering from that."
Groupon is an internet-based business that allows businesses to offer deep discounted coupon deals. Some are offered for one-day while other promotions range from three-months to a year.
Kunkle doesn't blame Groupon itself, but said she did not fully understand the risks.
In May, Food for All Market entered into a three-month deal with Groupon to allow an unlimited number of customers to get $30 worth of merchandise for $15. But Kunkle said she lost more than 50 percent on each transaction. Groupon took an additional $8 per sale. Kunkle said that meant for every Groupon customer, she lost $23. "I counted the days 'til it was over."
Over the three-month period, 451 people used their Groupon deal, which left Kunkle in the red by nearly $10,000.
The worst part for Kunkle is that she feels that her business model was sustainable before offering the Groupon discount. "I was completely breaking even up to that point," she said.
Food for All is a small specialty grocery/deli shop for people with food allergies.
Kunkle said the deal caused a cash-flow crisis and she just can't get enough money to keep operating. She tried getting a loan but says the time it would take to qualify and get the money is too slow.
There isn't a set closing date for Food for All. Kunkle said she will no longer be making new prepared foods and is selling everything in the store including the furniture and the pots and pans.
Kunkle is saddled with a five-year lease of the Germantown Ave. storefront.
She is hoping someone might be interested in taking over her lease or possibly buying the equipment from her and starting his or her own shop there.
As for saving the business, Kunkle said her only hope is that someone is willing to invest in her business right away. She still believes that if she can get past these slow winter months her business would become profitable.
Groupon is not for everyone
Food for All Market isn't the only business that has gotten into trouble with Groupon deals.
Posies Bakery and Café got in way over its head with a similar Groupon offering in Portland, Ore. Its owner lost $8,000 offering $13 of food for $6. The business survived and later posted a lengthy post-mortem on why it will never offer a Groupon deal again.
Closer to home, Will Caton, owner of Machismo Burrito Bar at 4330 Main Street in Manayunk, was once a fan of Groupon. In a NewsWorks interview last year, he said he saw many new customers and returning customers. Although offering 50 percent off meant he was losing money. At the time, he felt it was the cost of marketing.
But contacted yesterday for his reaction to Food for All Market's experience, he no longer feels Groupon is right for him. "I've pretty much lost my positive look on Groupon," Caton said.
He is now four months into his second Groupon offering, and he says things have changed. "This time I'm seeing my food costs soar, and my return customers plummet," he said. He said many people coming in are one-time bargain hunters who don't overbuy.
He also doesn't blame Groupon itself but says it's not for everyone. He does think that Groupon can work for a service-based business like massage therapy. "If someone is giving a massage they can get a client on that first (Groupon) visit and have that client continuously," Caton said.
He is critical of Groupon in one area. He believes the sales team over promises the number of return customers a business will attract. "Oh, you're going to be great for this. You're going to sell so many, you're going to get return customers, everything like that," he said of the sales pitch he got. "When in reality they don't have any proof on return for customers."
We want to know what your experience has been with Groupon as either a retailer or a customer. If you are a shop owner, what experience have you had with Groupon or other daily deal website promotions? As a consumer are you just interested in a one-time deal or have you become a regular customer because of a Groupon deal?