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Groupon Feels The Burn

Following a week of bad press and service issues, local social-shopping sensation Groupon must be glad it's Friday.

First, a cafe owner wrote a contemptuous blog post about Groupon's sales team, service and customers, claiming that her experience using the service nearly bankrupted her business.

"After three months of Groupons coming through the door, I started to see the results really hurting us financially," wrote Jessie Burke, owner of Posies Cafe in Portland, Oregon. "There came a time when we literally could not make payroll ... It was sickening."

Then, as TechCrunch reports, a photographer posted a fraudulent offer on Groupon, leading some to accuse the startup of failing to properly vet its business partners.

"The fact that no single photographer could fulfill thousands of shoots in a reasonable time frame, calls into question whether Groupon should enforce limits when deals like this are unreasonable, which is currently the onus of the merchant," writes TechCrunch.

Under the headline, "The dark side of Groupon emerges," writes: "When discussing Groupon, it's quite clear: the group buying business model is financially viable. For Groupon. What's less clear: whether Groupon's business model is financially viable for businesses."



In its defense, "Groupon is getting so big that it's bound to make a few missteps," writes ReadWriteWeb.

Indeed, Groupon raised $135 million in April, and, this summer,

In response to this week's onslaught, Groupon founder Andrew Mason writes: "Of course, we have heard from merchants who felt Groupon sent them too many customers. We responded to those concerns by creating merchant preparation materials."

"Also," adds Mason, "It has always been Groupon policy to allow merchants to cap deals. If a merchant sells too many Groupons, they'll have a bad experience, the customer will have a bad experience, and therefore, Groupon loses. We're longer-term thinkers than that."

Read the whole story at TechCrunch et al »

3 comments about "Groupon Feels The Burn".
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  1. Jp Holecka from Powershifter Media Corp., September 17, 2010 at 2:22 p.m.

    I have already met a few local business that had the same complaint. They say they were overwhelmed by the sheer mass of the activations and that Groupon never offered a cap on the total amount of coupons.

  2. Paula Lynn from Who Else Unlimited, September 17, 2010 at 7:46 p.m.

    Unbelievable if it weren't so believable. This company amassed such a sizable investment from investors who don't know about Business 101. Were their calculators at the witch doctors? Happy dot com day.

  3. Kim McCarten, September 18, 2010 at 5:15 p.m.

    Exactly, Paula---Business 101.

    You mean massive discounts (instead of reasonable ones) offered indiscriminately (instead of to targeted, potential customers) is an unsustainable model for small (really, any) businesses?


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