There IS Such a Thing as Too Much Business

When that business is being conducted at a loss.

I’ve been deeply involved in the Groupon debate for the past few days.

Earlier in the summer, I’d bought a Groupon from a Twitter friend and had used it to buy some jewelry at half price. Later, in August, I was approached by a Groupon clone company and got the details on what they really cost a small business. I did some math, realized it would never work for my business, and blogged about it .

Only a week or two later, I heard a story on NPR about Groupon in which a friend of mine with a business similar to mine was interviewed. He seemed to say positive things in the interview. When I called him, he gave more concrete information that didn’t seem too positive. I spent half a day crunching the numbers again and still couldn’t see how Groupon could benefit me.

I put that aside and got on with my life.

Back into the Debate

Yesterday, my attention was captured by a story on Plagiarism Today about a photographer who had been caught apparently passing off professional photographers’ images as hers on her Web site. The whole thing blew up in her face when she offered a 1-hour portrait sitting with print and CD of images for $65 through Groupon. She’d sold over 1,000 of these — far more than any photographer could complete in a year — when someone pointed out that photos on her Web site belonged to other photographers. She attempted to say that her site was hacked, but it was pointed out that the same photos also appeared on her Facebook page. Then her site and Facebook page went down; when her site reappeared it had a collection of crap photos that my mother could have taken with a Kodak 110 camera. (My mother is a horrible photographer.)

If you’re interested in seeing how the situation developed, read the comments from the Groupon thread, which were preserved by Petapixel after Groupon cancelled the offer, refunded the money, and deleted the thread. (A little too late to put out that fire.)

This story was picked up by many other sites, including TechCrunch. Their focus was on the ability of a business to effectively service Groupon customers, Groupon’s apparent failure to properly vet the services it features, and the hardship incurred by at least one Groupon merchant, Posie’s Diner. Since I’ve always thought that the Groupon model could be potentially harmful to a small business merchant using their service to advertise, I went to the Posie’s Diner blog post and read the story. It’s an honest and rather sad account by the restaurant owner who wound up having difficulties meeting payroll expenses while accepting the Groupons she’d sold. Each one had a face value of $13 but she’d received only $3 for each one. That meant she’d have to sell $13,000 of product for only $3,000 in revenue. The blog post explains the other related problems, which are mostly customer related.

Some Commenters Are Jerks

To make it clear, Posie’s Diner does not blame Groupon. She admits she made a mistake and takes full responsibility for it. But that didn’t stop the usual bunch of jerks from making nasty comments on her blog post. This one really pissed me off:

Businesses that complain about too much business should not be in business.

Wow. This guy needs to get a clue. If every sale you make comes at a loss, then even one sale is “too much business.”

That’s the situation I would have faced if I went with the Groupon clone — or Groupon. My margins are so low that I’d lose money on every single sale. I didn’t need that kind of business. No business does.

Is Groupon a Problem?

I admit that I resent the idea of a company making money off my hard work while I lose money on deeply discounted sales. Posie’s might have made a mistake going with Groupon, but it’s a mistake they won’t make again. I just won’t make that mistake at all.

To be fair, I read both good and bad comments all over the Web about Groupon from both merchants and customers. Clearly, there are possibilities for using the service with success. I just can’t figure out what they could be for my business. But there’s also a lot of pain in the Groupon model: the financial hardship of businesses with too many Groupon sales, the difficulty for customers being able to redeem Groupon goods and services due to crowds and overbookings.

Back to the “Photographer”

The idiot “photographer” who unknowingly pulled me back into the Groupon debate is truly a fool. Not only did she commit fraud when attempting to use other photographers’ work as examples of her own to sell her services, but she sold far more Groupons than she could ever expect to accept. If she hadn’t been revealed as a scammer in time to cancel the sale, she likely would have been out of business before long. After all, she was making less than $35 on each hour-long session at a client’s home. Between transportation costs and materials costs, she would have been in the red from day one. Would 1,700 sales at only $35 each have been “too much business” for her? I think so.

Then, when customers starting seeing the dismal quality of her work, would Groupon have refunded their money? And what would they have done when the fraud claims starting coming in and Groupon was called out for not properly vetting the offer?

Or maybe she was a true scammer who never planned to do any Groupon work. Perhaps she planned to just take the money and run.

Clearly, there’s some kind of problem with Groupon that needs attention. I’ll continue to watch from the sidelines. But I certainly won’t be giving Groupon any business in any form.

What do you think?