[danilocampos]

I see three immediate problems:

1. The merchant didn't think through the consequences of their promotion. They made a deal that was too appealing to an unnecessarily broad swath of potential customers. A commenter on the blog points out that the better approach is to figure out how to bait the hook for a specific type of desirable customer instead of having a fire sale.

2. Groupon didn't look out for their partner merchant. Groupon's job is to be really smart about the business they're in and to share those smarts with their partners. Sure, they're relatively new at this too, but a part of their sales process should be qualifying the deals they're going to be running for people and saying "hey, you know, this might be giving away the farm."

3. People are dicks; doubly so in a down economy.

[annon]

Agreed. She should have constrained what it could be applied to so she could manage her losses. If I was going to embark on a Groupon campaign, I'd want to look at how much money I would lose per Groupon and then figure out how many Groupons I could afford to sell.

If you just open the floodgates without calculating how much you can afford to lose, it's not Groupons fault, it's your own. Even a layman should be able to understand that you're going to take a loss in the short term, so don't allow yourself to take a bigger loss than you can afford.

She even makes it clear in her facebook post that this is entirely her fault:

"...I hung up and thought it over. I called him back and said we would have to get at least 50% to cover our costs of product… to this day I don’t know why I thought even 50% would be a good deal for us. Maybe because I thought since we were covering our food costs. What I didn’t think clearly enough about was that that margin we mark up is what covers all of our other costs… like staff, rent, utilities, etc. Our overhead is roughly $25,000/month, and this decision was about to make it so that we didn’t cover any of those other costs."

[nathanwdavis]

Angie's List (my company) has created a similar group coupon system (The Big Deal) as Groupon, but targeted to a more niche market. We actually allow companies to set a hard limit on the number of coupons that can get sold. This allows businesses to offer really great deals that they expect may do negative revenue just to bring in new customers, but control the loss with the limit.

I'm surprised Groupon doesn't do this. Or do they and this business just didn't set a limit?

[adbachman]

They do not set a limit, or at least didn't in this case.

"When I talked to Lucinda today, she asked if there was a cap on how many were sold to help protect the business from too much loss, and the simple answer is, no. When you sign up for Groupon, you are agreeing to sell as many as get sold."

[Kadrith]

I thought the merchant was able to set a limit, if they choose to. Or am I wrong?

[e40]

Just went there to check out your website. I must say, it is very annoying that after clicking around for a few minutes I couldn't find the cost. That is, without giving you an email address.

[nathanwdavis]

Angie's List prices vary greatly by market, so we don't emphasize the cost too much to anonymous users. However they are available through the FAQ: http://www.angieslist.com/angieslist/visitor/faq.aspx#whypay

[enjo]

They do, at least for promotions I've seen through GroupOn. This business owner really shouldn't be in business.

[MicahWedemeyer]

Yeah, your #2 really burns me up. Groupon should be the ones to call out point #1 to the business owner. Work with the merchant to design a deal that benefits them.

[SoftwareMaven]

As a business owner, you need to recognize all the costs of your marketing campaigns. It is not Groupon's fault if you fail to manage your business.

[stanleydrew]

Actually there is a fine line. Is it the mortgage broker's fault if a homeowner has to declare bankruptcy due to the broker promising her that dream house and selling her a completely unaffordable loan?

[SoftwareMaven]

Actually, I don't see it as the broker's fault, and I think it is a net negative for our society that so many people (especially the people who sign and aren't able to pay) do think it is the broker's fault. If the broker is lying or otherwise being fraudulent, that's a different story.

FWIW, I don't believe this is what the coffee shop owner believes.

[Someone]

In the Netherlands, law (dis)agrees with you.

Disagrees: Banks are obliged to make a honest effort of preventing that from happening.

Agrees: another way to look at that is that, alongside the mortgage, banks do give financial advice. Part of that is answering the question "can I afford this?". If they ignore that, you could call that "lying or otherwise being fraudulent".

[SoftwareMaven]

As I said elsewhere, if the bank lies to you, they are certainly culpable. In the US, there are standardized forms that must be filled out that are supposed to give you all the "true costs" of a loan.

Beyond, that, though (and recognizing laws might differ), the bank is obligated to tell you what you "qualify" for, which may be drastically different than what you can afford.

The real grey area is in the tricks they can play with loans, and this is the point where "buyer beware" can certainly turn into "hang the SoB", depending on the behavior of the bank.

[exit]

why don't you think it's the broker's fault?

[SoftwareMaven]

If the broker lies or presents false information, then it is obviously his fault, and that includes hiding things like a a seven-year balloon payment.

On the other hand, if the broker tries to push you into a loan that is more than you can afford or has bad terms for you (like that seven-year balloon payment), it is your responsibility to know whether you can make that work or not.

<rant> I really believe that a good portion of the reason we are seeing so many foreclosures is because people weren't willing to take responsibility for their actions. They left it to mortgage companies to tell them what the could do instead of looking at their own lives to figure out what they should do. </rant>

[Marticus]

Plain and simple: She should have driven a harder bargain or not gone for it.

Also #3, #3, #3, and #3. People don't read the little bit on Groupon where it says "tip like you're not getting a discount," or just ignore it, and also #3.

[jaxn]

Groupons terms are not really negotiable.

They offered me the same terms when I called them about my retail stores. (want min 50% off for consumer, they take 50% of revenue). I told them it was too rich. They wouldn't budge. I walked away.

They have a 6 month waiting list in some areas, why would they negotiate.

I am amazed that so many businesses accept these terms. There is just no way it makes sense.

[dgrant]

Merchant should have taken into account #3.

[waterside81]

You're bang on with #1.

Our company was on Groupon NYC and they took their 50% cut of each Groupon sold (plus the merchant pays the credit card fees - don't forget about that. Your take is actually less than 50%). Luckily we had a bit of a math on our side as our markup on our products is pretty big so even after Groupon's cut, we still made about 15%. As of this writing, only 28% of our Groupons have been redeemed, so we're quite ahead. But I think our case is the exception - I have yet to hear too many stories about businesses thriving because of these social deals.

[GlennKelman]

#3 is just brilliant.