Groupon, Living Social and other Deal of the Day Sites - News & Updates

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Groupon, Living Social and other Deal of the Day Sites - News & Updates

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Started 1 year ago by Walker
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Walker
The KLD / Downtown
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Very interesting article in the Dispatch today ("Deals dissolving") about chain restaurants pushing a national trend back towards normally-priced menus and steering away from discounts, deals and other cost-saving promotions.

I imagine this is in anticipation of an economic recovery, and independent and non-chains will follow suit in the near future.

As a board member of Dine Originals, I speak to a lot of restaurant owners on a regular basis and I've gotten the general impression from many people that the burden of slashing costs has really taken a toll on local businesses. It keeps people coming through the doors during tougher financial times, but doesn't sound like a long-term sustainable practice.

Just curious what other people think of this news. Will you still be likely to go out to eat as much as you do now if prices slowly inch back up and discounts start to disappear. How often are you using discounts (Discount Gift Cards, Groupon, Fudha, etc) currently? Do you think the restaurant industry is a barometer of economic recovery?

Posted 1 year ago #
Andrew Hall
Dennison Place (The Circles)
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Given Groupon's vig, I will not be surprised if that model is unsustainable for restaurants. It also strikes me as troublesome. Food costs aren't going down (unless you start sourcing cheaper), fixed costs aren't and that leaves labor. The other side is to increase margins on relatively inelastic items like alcohol, but that is proving to be more elastic.

I'd like to see restaurants - at all price points - focus more on delivering value instead of attempting to compete on a false economy of price. Promotions like Restaurant Week with a prix fixe menu make more sense as establishments can focus on delivering what they do at specific prices.

A.

Posted 1 year ago #
cc

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I would rather restaurants charged across the board fair prices rather than patchwork savings based on coupon holders. I don't want to feel like I am on an airline when paying $5 more for my food than the the guy at the table next to me. Give good service at a fair price and cut out the gimmicks.

I think the restaurant industry is on top of the discretionary spending pyramid. The top of the food chain is the most susceptible. I think the ending of coupon deals may also be a necessary tightening of the belt after 'priming the pump' by all these clubs and discounts have failed or run their course. I do not think we have seen an economic turn around yet. We will probably see more restaurants close.

Posted 1 year ago #
somertimeoh
Harrison West
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I only buy the coupons for places I don't already go to. For instance, I've been to Deepwood once, years ago and loved it, but haven't returned for multiple reasons. They came up on fudha and it gave me the kick in the pants I needed to get back there and I'm excited for lunch tomorrow, wooo. But I would never buy one for a BFR establishment or anywhere else like that. So, in my thinking, Deepwood is gaining from this transaction. While the first $20 I spend is deeply discounted, the rest is sales they wouldn't have otherwise received from me. And hopefully tomorrow I'll be as equally impressed as I was the first time and force it to hit my radar more frequently. Win-win, right?

What is the average redemption rate of the coupons? I'm sure that's factored in when the # offered is established. I remember someone being worried about Weiland's when they did one on Groupon, but I'm still holding on to mine, which is about to expire, because I don't get out that way much and it's the reason I don't go to Weiland's more in the first place, even though I love it.

There's lots of factors to this industry. I think one or two will come out ahead and the rest will either get bought out or just fold. Looks like Groupon has the early lead though I think their competition here is stiffer as far as restaurants go than in other cities because of the pre-existing DOC program and our local fudha. They focus on a lot of other weird stuff which I think is kinda cool.

Posted 1 year ago #
jennyleah31

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i'm becoming a bit obsessed with fudha (groupon is hit or miss) and i can see how it would hurt the restaurant but... ur only allowed to use 1 coupon per visit and u go with a couple of people, no matter what $20 ain't getting you far unless it's $5 mac'n'cheese night at Betty's and even then we always end up buying more than normal. :) if i can do take-out then i'm most likely only spending the amount of my gift card...

restaurant week is great and they do similar things in other cities. it definitely gets me into the door of restaurants i've never tried.

Posted 1 year ago #
dirtgirl
University District
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I've used fudha a couple of times, but I can't help but feel bad for the restaurant since I usually use them at places I would go anyway. And after having a bad experience (Tasi claimed my fudha serial number had already been used by someone else), I think I'll steer clear. It's not worth it to save $5 and why would I want to do that when I want the restaurant to profit and stay in business.

It actually concerns me all of these electronic promotions and discounts that allow you to print out your gift certificate. If I can be told that mine has already been used, then clearly there is a risk of fraud or bookkeeping errors. It's more of a hassle, but if I could get a genuine non-forgable gift certificate in the mail, it might allay my concerns about hassle/embarrassment if my Tasi experience is repeated.

As far as discounts, I would prefer to see more restaurants take the lead of Deepwood and do special menus (the morel menu, beer menu, or this week's wine menus come to mind). I end up spending more than I would otherwise, but I always chalk it up as "educational" when justifying the extra expense. I also like a great bar menu selection. lately, we don't even eat dinner at Rigsby's, we just sit at the bar and split a pizza and a couple appetizers. It comes out much cheaper, and we really prefer the experience.

Posted 1 year ago #
joev
Merion Village
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Yeah, I don't like using coupons. Makes me feel like a cheapskate. I especially didn't know that the Dine Originals coupons are donations from the restaurant to the DO group - so basically when you use one, the restaurant doesn't see a penny of the price you paid. Not sure how Fudha works financially, but I can see it being of value as a short term marketing tool for a place that's underexposed/low traffic. You might retain a few of those customers, but I would guess the heavy Fudha buyer is motivated by the discount more than the quality of the food.

But I agree - fair pricing is best. I want the restaurants I like to stay in business, and I like to get a good value. Especially on drinks. Please restaurants, stop charging $6 for a glass of wine that costs $6 a bottle. Maybe try a house wine - an unspectacular but decent wine served at a small markup. I'll drink a few glasses of that, and probably linger longer and order dessert. If I see a $6 glass of Sutter Home or Redtail, I'm going to stick with ice water and finish up quick.

Posted 1 year ago #
somertimeoh
Harrison West
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If I recall Walker correctly, they are donations in lieu of a membership fee. So in order to be a part of the marketing machine that is DO, you donate certificates.

Posted 1 year ago #
joev
Merion Village
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somertimeoh wrote >>
If I recall Walker correctly, they are donations in lieu of a membership fee. So in order to be a part of the marketing machine that is DO, you donate certificates.

Still - It makes me feel like I'm screwing the restaurant. But I've bought a few that I never used, so maybe it balances out.

Posted 1 year ago #
Walker
The KLD / Downtown
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joev wrote >>

somertimeoh wrote >>
If I recall Walker correctly, they are donations in lieu of a membership fee. So in order to be a part of the marketing machine that is DO, you donate certificates.

Still - It makes me feel like I'm screwing the restaurant. But I've bought a few that I never used, so maybe it balances out.

Think of it this way... restaurants can either pay $3000/yr to be a member of DOC and receive the benefits of being a member of the group... or they can donate $3000 in gift cards which are then sold to raise that money for the group while the restaurant is essentially just comping food costs (which is most cases I've heard is around 33%).

It allows the DOC group (non profit, btw) to raise the same amount of money to function and provide the member benefits while also cutting the annual membership fees down to a third of what they would be if the restaurants had to cut a check upfront and pay directly out of pocket.

Outside of the external marketing that DOC does for its member restaurants (which is what most of the general public sees) there are also purchasing groups and bulk discount benefits that restaurants receive that can help them save money on everything from fire suppression systems to produce suppliers to linen cleaning vendors to everything else. Not that it matters so much to the general public, but I like to think that local restaurants stand to gain much more than what they lose in that roughly $1000/yr (33% of $3000) that they have to "donate" in gift cards for membership.

Hopefully that helps you to see those gift cards as being "fair" as they support DOC which then supports the restaurants in a very direct and impactful way. I wouldn't have joined their board of directors and donated countless hours of my own personal time to assist them if I didn't feel strongly about their mission of helping our local/independent restaurant community thrive.

PS: I don't know if that $3000/yr number is still accurate or not. It was thrown around in the past, but could have changed since then. I'm more involved in marketing and communications on the board rather than membership outreach, so I don't work with those details on a regular basis. Just wanted to make a disclaimer in case any non-DOC restaurants are reading and considering joining and the membership dues are more/less than mentioned here. ;)

Posted 1 year ago #
cc

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I guess then this would not be a 'burden of slashing costs' to the owners? It seems like DOC can justify itself. I would still rather not use coupons, I think it takes away from the ambiance of going out. It is a lot different than buying food at a grocery store.

Posted 1 year ago #
Walker
The KLD / Downtown
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cc wrote >>
It seems like DOC can justify itself.

I think so. But that's just me. I'm sure there are plenty of local restaurants who don't want to join DOC because they don't think it would be worth it for their particular business model. And that's fine too.

I think DOC is a completely different animal than what the conversation was started about. DOC is a nonprofit group formed by local restaurant owners who wanted to start working together for mutual benefit. Groupon and other "deal of the day" promotions are for-profit companies who have a financial model built on selling discounts to restaurants. Not that being for-profit is a bad thing. I'm just really curious (both personally and professionally) about where all of this is heading. Is there danger in "deal saturation"? Is this Dispatch article about national chains a signal that these deal models are going to continue to grow like wildfire or start to plateau?

Posted 1 year ago #
joev
Merion Village
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@Walker - Don't get me wrong - I think DOC is doing great work, and that's a very innovative funding model. Kudos. I was just explaining why I have got away from using those coupons.

Posted 1 year ago #
Walker
The KLD / Downtown
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No problem. Just trying to offer a bit of extra info about the organization and how those gift cards work. ;)

Posted 1 year ago #
Andrew Hall
Dennison Place (The Circles)
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If there is a 20$ Groupon for 10$ and we assume a customer spends 2x of the coupon (40$ tab), let's look at the numbers:

The restaurant provides 40$ value for 25$.
The customer gets 40$ value for 30$.

If the customer perceives she gets at least 40$ of value, she will return. She probably needs to return twice for them to make up that loss which can be considered as advertising cost.

If the customer perceives she gets 30$ of value, she won't return to pay 40$. How many restaurants really provide something noticeably 33% better than a competitor at that lower price point?

There is also a level where the coupon monster starts eating its own tail when the restaurants are especially fungible. If I can get a 1/2 price coupon for your competitor, why would I make the return visit to your restaurant?

As I said before, restaurants have to figure out how to provide value. Prix fixe (and always lagniappe), loyalty bonuses (but don't make a customer have a stupid card), remember customer's birthdays/anniversaries/etc, not mass coupons but specials for regulars/social media. The irony is that this is all really old school high-end stuff that technology now makes accessible to a wider range of restaurants.

A.

Posted 1 year ago #
takeasiesta
Harrison West
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The point of coupons, whether it's a restaurant or a retail store is to get somebody in the door so they are spending their disposable income at your establishment and not somebody's else. With Columbus practically having infinite restaurant options it would be dumb to not do this. It's a form of advertising. It's not necessarily about giving someone a deal.

With chain restaurants in general, the reason the pricing is out of control is because the portions keep getting bigger and bigger. If we scale down portion sizes, everyone wins.

I try to use coupons when I can, but it takes a lot of effort sometimes to print out stuff that you aren't going to use. Sometimes coupons are hard to use if the people you're going with do not want to go there or if there's a wait on a Friday or Saturday then we'll choose to go somewhere else.

Posted 1 year ago #
Andrew Hall
Dennison Place (The Circles)
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takeasiesta wrote >>
The point of coupons, whether it's a restaurant or a retail store is to get somebody in the door so they are spending their disposable income at your establishment and not somebody's else. With Columbus practically having infinite restaurant options it would be dumb to not do this. It's a form of advertising. It's not necessarily about giving someone a deal..

If you lose money on someone coming in the door because you get 25$ for 40$ of product, then you are better off not serving that customer at all. Unless you can be assured they will return a couple more times due to this initial exposure and that gets less likely the larger the coupon universe grows.*

If you make money on that transaction, then you are over-priced compared to your competitor unless you are really special. And the coupon just exposed this to the customer.

(The DOC promotions work a little differently since the business is getting N$ worth of membership.)

I would strongly argue that most restaurants are better off engaging in building value at their price points as well as offering specials or discounts that are more specifically tailored to their customers. There are plenty of ways to do that which don't cost 15$ / 40$ couple.

* I do realize that my numbers are starker that reality since there is a reasonable failure to redeem buffer that is built in. I don't think one should base models on irrational consumer behavior though.

A.

Posted 1 year ago #
takeasiesta
Harrison West
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Andrew Hall wrote >>

takeasiesta wrote >>
The point of coupons, whether it's a restaurant or a retail store is to get somebody in the door so they are spending their disposable income at your establishment and not somebody's else. With Columbus practically having infinite restaurant options it would be dumb to not do this. It's a form of advertising. It's not necessarily about giving someone a deal..

If you lose money on someone coming in the door because you get 25$ for 40$ of product, then you are better off not serving that customer at all. Unless you can be assured they will return a couple more times due to this initial exposure and that gets less likely the larger the coupon universe grows.*
If you make money on that transaction, then you are over-priced compared to your competitor unless you are really special. And the coupon just exposed this to the customer.
(The DOC promotions work a little differently since the business is getting N$ worth of membership.)
I would strongly argue that most restaurants are better off engaging in building value at their price points as well as offering specials or discounts that are more specifically tailored to their customers. There are plenty of ways to do that which don't cost 15$ / 40$ couple.
* I do realize that my numbers are starker that reality since there is a reasonable failure to redeem buffer that is built in. I don't think one should base models on irrational consumer behavior though.
A.

There are also ways to upsell with appetizers, drinks, or desserts to get someone to purchase more. I would also think with Fudha, in general, that since the purchase of gift certificates are going to charity that this would be a tax write-off for the restaurant.

For restaurant week you strategically choose the menu you are offering so you don't feel the lost. I.E. You aren't offer fish or another high priced item.

Posted 1 year ago #
Stacky
Franklinton
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The article makes it sound as if economic recovery may more negatively affect chains, and I personally have no qualms with that. In fact, I think it would be ideal if people begin to save up the money they may have used to go to Olive Garden or Burger King every week during harder times and use it on a locally owned, unique restaurant every other week as their own funds recover.

I've subscribed to Fudha and Groupon for several months now, but I have yet to buy any restaurant coupons. I share dirtgirl's feelings that I'd prefer not to use discounts that take money away from those businesses I want to stick around. However, I want to use coupons to introduce my friends and myself to placees we have yet to try.

It seems that the economic experience of the past couple years has at least partially encouraged a movement back to making meals at home and being more aware of what you're buying/putting into your body. We're seeing more community gardens and farmers markets and research/funds going toward the support of a regional food system. Personally, as an independent young professional who frequented restaurants a couple years back, I've realized I can make some pretty damn good stuff at home with beautiful produce for cheap. If I dine out now, I'm going to be pickier and skip the chains in favor of a more memorable experience (atmosphere, creative dishes, company, service).

Posted 1 year ago #
Andrew Hall
Dennison Place (The Circles)
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Upselling is the exact opposite of providing value - which is why I think the Groupon model is ultimately (with restaurants in particular) bad for consumers. It encourages a war on a price basis rather than a value basis. Labor and the consumer who gets upsold are the ultimate losers. If there is truly a race to the bottom, it is not independent restaurants which are going to win.

That very cynical attitude is the reason I am vocal on this issue, btw.

Tax write off is post profit. For a substantial amount of restaurants, especially newer and independent, they don't have tax liabilities on profit. Also, the 1$ would be the write-off, not the face value unless the purchaser takes it or Fudha does.

If you note above - I think the restaurant week model (prix fixe) is a great idea. It enables you to manage costs and provide value as well as tailor the "discount" to your customers and the uniqueness of your place.

A.

Posted 1 year ago #