Tag Archives: business

What People are Saying about Groupon

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A list of links of interest to people who want to learn more about how Groupon is screwing small businesses and customers.

A while back, I wrote a few posts about Groupon — including “Why Groupon is Bad for Business…and Consumers” — that continue to be among the most popular posts on this site. But if you really want to learn more about the dark side of Groupon, I urge you to check out some of the links I’ve collected over the past year or so:

  • Groupon gripes: Are daily deals headed for disaster? – Like I’ve been saying, SOMEONE has to pick up the tab on these great deals, and it’s usually the business owner, sometimes disastrously.
  • Why Groupon is bad for your business (and mine) – “Groupon, the so-called social buying site (even though there is very little social going on outside of the manipulation of basic human behaviors like their reaction to a situation where there is sense of scarcity) and the fastest growing company in history, is bad for your business.” Read why on EmergenceMarketing.com.
  • Groupon Reviews: Worst Marketing For Your Local Business – “Just because millions of merchants have fallen under the spell of Groupon, a PR juggernaut, and their like, it doesn’t mean you should. It’s a killer alright, a profit-killer.” Read a real case study on RetailDoc.com.
  • Groupon’s big discounts: how its coupon business could eventually cripple the merchants that rely on it – The author of this piece almost gets it. “The logic is simple: Merchants are encouraged to use the deals to attract new customers, who in theory will return at full price. But, in what seems to be an increasing number of cases, customers come for the deals and then leave for deals offered by other merchants through Groupon. So the number of “new” customers attracted by cheap prices increases, and the number of loyal customers decreases as shoppers prefer to become “new” again for whomever offers the best deal.” Read more on Slate.
  • 2 of 2 Daily deal sites: retailers tell their side of the story – Another objective look at Groupon, this time from the retail side.
  • Groupon Was “The Single Worst Decision I Have Ever Made As A Business Owner” – More on Groupon.
  • Why I Want Google Offers And The Entire Daily Deals Business to Die – Thank you, TechCrunch, for bring more attention to this problem.
  • Why Groupon Is Poised For Collapse – “Businesses are being sold incredibly expensive advertising campaigns that are disguised as “no risk” ways to acquire new customers. In reality, there’s a lot of risk. With a newspaper ad, the maximum you can lose is the amount you paid for the ad. With Groupon, your potential losses can increase with every Groupon customer who walks through the door and put the existence of your business at risk.” I couldn’t have said it any better. On TechCrunch.
  • Why Groupon is Bad for Small Business – Some specific notes on what’s wrong with Groupon from the small business owner’s point of view. Excellent points.
  • Groupon Is a Straight-Up Ponzi Scheme – Why Groupon can’t work in the long run: “The vast majority of local merchants can’t discount more than 10 percent. Some can go maybe 25 percent in special situations. But 75 percent is a wholly unsustainable number. If all local merchants begin using Groupon then it can’t send loyal customers to anyone; Groupon can only send discount chasers to merchants. Which means that as Groupon grows, both local merchants and their competitors will find that Groupon’s main argument no longer works (if it ever did) — Groupon simply can’t send them loyal new business. So they all stop using Groupon in its current form.” Read the rest of this interesting article on Knewton.com.
  • Groupon amends IPO filing to remove odd accounting – Read about it in Business Week.
  • Groupon’s loss jumps in second quarter – “Groupon Inc.’s second-quarter loss more than doubled as it hired more than 1,000 new employees, even though the Internet daily deals company trimmed back its marketing costs.” Read more in Crain’s.
  • Groupon IPO: Could the company really be worth $30 billion? – While investors may be stupid, analysts usually aren’t. Did anyone really fall for Groupon’s creative accounting? Read about it in Slate.
  • Are online coupons worth it? – Another aspect of Groupon: online reviews of your business. Interesting experience and food for thought.
  • The economics of Groupon: The dismal scoop on Groupon – The Economist provides some real-life numbers on Groupon, showing that original estimates of their IPO value were extremely optimistic. Marketing expenses are currently eating up more than 60% of their revenues. I can’t see how that could possibly be sustainable, especially when they’re losing merchants and customers every day.
  • Groupon demand almost finishes cupcake-maker – Simple math: sell enough product at a loss and you will find yourself in deep financial do-do. Don’t let Groupon fool you into offering a deal like this.
  • Groupon Snafu Leads Baker to Produce 102,000 Cupcakes – Another Groupon horror story indeed.
  • Groupon to be investigated by Office of Fair Trading – “Advertising watchdog refers daily deals website after it was found to have broken UK ad regulations 48 times in 11 months.” And so it begins in the UK.
  • more to come…

I’ll update this regularly as I find more links.

Got a link to another Groupon-related piece you’d like to share? Put it in the comments.

How the U.S. Postal Service Can Save Itself

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Five tips for avoiding bankruptcy/bailout.

USPS LogoIt’s pretty big news, every once in a while, that the U.S. Postal Service (USPS) — which is not funded by tax dollars — is on the verge of going broke. Then they raise rates by a few pennies and the hubbub dies down.

Until next time.

I think the big problem with the USPS is that it’s unable to keep up with changes in technology that make its core business model nearly obsolete. After all, the main business of the post office is to provide mail delivery service. In the past, this included personal and business letters, bills and bill payments by check, postcards, and other bits of correspondence. Letters have been mostly replaced by fax and email. Bills and bill payments are being replaced by online billing and bill payments. And who sends postcards in the age of smartphones when you can share vacation pictures as you take them via MMS or email?

As technology moves on, the USPS’s services are less and less needed. But does that mean they’re not needed at all? Of course not. (Not yet, anyway.)

Bad management and spending practices by the USPS are what’s putting it in peril these days. Simply said, the USPS needs to cut costs and raise revenues. Here’s what I propose:

  • Raise prices on bulk mail. It’s widely known that the USPS gives huge discounts to big customers — the same people who fill your mail box with what most of us consider “junk mail.” Not only is this extremely wasteful, but the USPS isn’t making nearly as much money delivering it as it could. I propose that they raise the rates on bulk mail — possibly even making it just as costly as first class mail. The result: fewer organizations will find it cost effective to mail their marketing materials to people who likely don’t want it anyway. The USPS will carry less of this material, thus reducing its costs. And for the remaining organizations that continue to utilize the service, the USPS will likely generate the same (or more?) revenue.
  • Stop trying to compete with FedEx or UPS. Let’s face it: for sending something overnight, FedEx is not only the best deal, but it’s got the most reliable service. Not long ago, the USPS couldn’t even guarantee overnight delivery from Wickenburg, AZ to a major city like Berkeley. FedEx could. As for shipping parcels, I recently shipped a 33-pound computer that I sold on eBay; UPS was half the price of USPS. Yet every time I go into the post office, I see advertisements pushing their services. The USPS should focus on what it does best: deliver small pieces of mail quickly and efficiently throughout the US. That means concentrating on its affordable Media Mail, First Class, and Priority Mail services.
  • Stop advertising. Come on — we all know that the post office exists. We all know what it does. You don’t need massive advertising campaigns to get customers. If I have to mail a letter or document and it doesn’t need to get there overnight, I’ll use USPS. And about those big color posters in the post office pushing your overnight services — see my previous point.
  • Stop giving away free packing materials. I’m talking about those priority mail envelopes and boxes. I know someone who used USPS priority mail boxes to pack when she moved. And no, I’m not kidding. She kept going to the post office and taking boxes. Not a single thing was mailed. I’m not saying that the USPS should stop providing them; I’m saying that they should charge a fee — even something small, like 50¢. It’s worth the money to customers — I’d definitely pay it — and it will generate more revenue while reducing waste.
  • Reduce mail delivery to three times a week. This is the ultimate in cost cutting measures. Unfortunately, it also causes job losses. But guess what? Real companies reduce their workforce to save money; why shouldn’t the USPS? The way I see it, they could deliver to business and commercial addresses on Monday, Wednesday, and Friday and use the same carriers to deliver to homes and residential addresses on Tuesday, Thursday, and Saturday. People who think they really need daily mail delivery can get a post office box, which would receive mail every day as it’s sorted at the post office. Not only does this reduce the cost of delivery, but it could increase revenues from post office box rentals.

So that’s five tips that will help reduce costs while increasing revenues. Why can’t the USPS utilize some combination of these? I think the results will make a huge difference in the continued operation of the USPS as a solvent business.

Comments? Have your say.

Occupy Wall Street

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I’ll voice my own opinion through the words of others.

I’ve been pretty quiet about the Occupy Wall Street movement. And I’ll be honest here: I’m keeping my thoughts to myself because they’re not exactly popular.

And that’s made me wonder whether I’m missing something. Why is it that I’m not all gung-ho about this movement? After all, I share a lot of the same frustrations as the Occupy protesters. Why is it that I don’t feel comfortable speaking out in support of them?

It wasn’t until recently that I realized that I really didn’t support them — not the way most of the people I know do. I think a lot of people have been blinded by emotion and aren’t seeing the big picture. I’m seeing a bit of that picture, mostly because I’m reading the thoughtful words of others who are far more knowledgable than I am.

I’d like to explain where I stand on this issue by sharing three blog posts I’ve read about the Occupy movement that really ring true to me. I’ve linked to these on this blog and on various social networks, but I haven’t really talked much about why they’ve echoed my sentiments. Here are my comments, in the order in which I read them.

Like a Rolling Stone

First off, Matt Taibbi’s excellent October 25 piece for Rolling Stone, “OWS’s Beef: Wall Street Isn’t Winning It’s Cheating.” This is Matt’s attempt to explain why the protest isn’t about envy. It’s about anger — anger over the fact that Wall Street investment firms and banks aren’t playing by the same rules that the American public is. He points out the availability of interest-free loans, forgiveness for missing payments, bailouts for losses resulting from bad/careless business decisions. He’s absolutely right: the average American doesn’t have Uncle Sam to help him out of trouble if he makes a bad investment decision or misses a mortgage payment. Financial institutions do. And because of this, they’re able to reap huge profits and pay their executives huge salaries and bonuses. They’re cheating, Taibbi argues, and that’s how they’re winning. And that’s why the Occupy protesters are angry.

I pretty much agree with this. After all, it explains why I’m angry. I’m angry partially because my tax dollars went to rescue financial institutions that were “too big to fail” instead of creating jobs, improving education, or helping people get affordable health care. I’m angry because the management of those financial institutions — the same people who send jobs overseas, stick customers with huge fees, and take bailout money when they make business mistakes — have huge compensation packages. I’m angry because I know that the reason big business gets all these benefits is because they paid good money to line the pockets of too many politicians, one way or another, and those politicians are taking care of the people who paid them off — not the people who voted them into office.

And here’s another thing: If I make bad decisions in my business, my business would fail. Why is it that big financial institutions aren’t allowed to suffer the consequences of their own mistakes — and I have to? That’s what’s making me — and many others — angry. It’s the unfairness of the system. That’s the point Taibbi is trying to make and I think he does a pretty good job, with lots of examples to illustrate what he’s saying.

But, at the same time, I think Taibbi’s mistaken if he thinks all of the OWS protesters are driven by anger more than envy. Too many are pushing socialistic ideas like wealth redistribution. Too many believe they’re entitled to jobs — not just honest jobs that utilize their skills and give them a stepping stone to move up. They seem to want only certain kinds of jobs with only certain kinds of companies, jobs that pay a high wage without making them “wage slaves.” I blogged about this the other day.

And with people like that in the movement, it’s hard for me to support the movement as a whole.

Who Is Dave Ramsey? Beats Me.

Dave Ramsey’s October 19 piece, “Dear Occupy Wall Street ,” summarizes another reason why I can’t fully support the OWS movement. This is what has been nagging me for a long time — the movement hasn’t been able to adequately communicate exactly what it expects to achieve. In this piece, he critically reviews the slogans found on OWS protester signs. His thoughts pretty much echo mine.

Now I don’t who Dave Ramsey is. From what I gather from his website, he’s some sort of financial advisor. (I see a tab labeled “Church Leaders” on his home page and I find that worrisome, given my own lack of belief.) Is he left, right, center? I don’t know and I don’t care.

One of the problems we have these days is that if we know the messenger, we automatically agree or disagree with what he says because of labels put on him. But do we ever stop to read what these people have to say? I don’t care if Dave Ramsey is an ultra conservative, Tea Party card-carrying wacko — I agree with almost everything in this piece. Why don’t you read it and see if you do?

Words of Wisdom from Alaska

And finally, tying all the strings together in a nice, neat package, is a recent post by Jim Wright in his blog, Stonekettle Station. I like Jim’s writing. He doesn’t beat around the bush. He says exactly what’s on his mind. But instead of just blathering out solid opinion (as I so often do), he backs up everything he says with facts or information from his own personal experiences as a retired naval officer.

In “Occupy Wall Street, Lessons From The Tea Party, and Niven’s Law,” Jim begins by explaining why it has taken him so long to write about OWS. And, as I read, I began to realize that he also felt a lot like I do about the movement.

Jim’s main beef is twofold:

  • These are not peaceful protests. While yes, it’s true that in some instances, police have overeacted (think pepper spray in NYC), in many other instances, the police have just been doing their job to control unruly mobs. Interestingly, he compares OWS protesters to Tea Party protesters and the Tea Partiers come out looking not only a lot more civilized, but a lot more effective.
  • In a democracy like ours, We the People have the power to make changes like many of the ones the OWS protesters apparently want. That power is granted by the vote. Jim points out that the number of people who bother to get out and vote is rarely as high as even 65%. That’s 35% of the people who — in his opinion (and mine) — have absolutely no right to complain about elected officials and the laws they pass.

Jim’s no-nonsense piece is an excellent critical analysis of the situation, along with suggestions on how it can be improved to be more effective. After getting a lot of feedback, he wrote a follow-up piece, “Occupy Stonekettle Station, The Follow Up,” which attempts to bring rational thought into a reader discussion dominated by emotion-charged excuses and criticisms. But will people listen? I doubt it.

The Way I See It

In my mind, the OWS movement has problems on multiple levels.

  • Emotions are getting in the way of reason. People are caught up in the anger or envy (or whatever) of the main theme. They’re either for it or against it, period. They’re too emotional to consider the facts.
  • The main theme (and sub themes) are not being clearly communicated. Because the movement is so disorganized, there are too many themes and some contradict others. Yet supporters focus on the ones they agree with and assume the whole movement is about that. This simply isn’t the case.
  • Sources of information are biased and are showing just one side of the issue. For example, we all saw a few innocent women get pepper-sprayed for no apparent reason — and that image got many people to support the movement. But did we all see the man defecating on a police car? Or the mob breaking windows at a bank? Or the people hurling burning bags of shit at police officers? If so, did that change your opinion of the movement as a whole?
  • People trying to engage in a reason-based discussion of what’s going on and how it could be made more effective are being shot down by the blind supporters of the movement. Why do you think I’ve been so quiet? Every time I mentioned my doubts on Facebook or Google+ I was blasted by “friends” who could only shoot back with emotion-based arguments.

It’s unfortunate because the movement is polarizing would-be supporters, thus losing the support of rational, thoughtful people who might help it succeed.

Those are my thoughts on the Occupy Wall Street movement, as voiced by others who have written in more detail about it. I’m not against it, but I’m not for it in its current form.

I’ve been saying for months now that we need to clean house, we need to vote out everyone in office. I’m not blowing smoke. I really think this is true. Politicians are in the back pockets of big business. We need new politicians — candidates who actually care about the people — to move in and make a change. The only way to get that is to vote.

Don’t fight the system. Use it.

Got Something to Add?

June 30, 2014 Update
I’ve finally gotten around to writing up the site comment policy on a regular page (rather than post) on this site. You can find it here: Comment Policy.

I’ll leave comments open here — at least for a while — but I will remind everyone of the comment policy. I will not approve any comments that include a personal attack on me or any other commenter.

In addition, if you want to comment on this post, read the articles I linked to here first. If your comment demonstrates that you didn’t even bother to read what you’re commenting on, I will not approve it. I’m presenting this blog post as an attempt to get a reasonable discussion going. If you can’t be reasonable and back up what you say with facts, don’t waste your time here.

Understanding the Value of a Service Rendered

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A follow-up to last week’s post about the “Groupon mentality.”

This morning, I got an email message that I can only assume is from the same man the hotel concierge I blogged about was dealing with. I guess he figured that he could cut out the middleman and save some money. His message (with parts redacted), was as follows:

Heard about you from [redacted] Hotel. … my wife and I are in the area for business and I wanted to do a helicopter tour of the grand canyon. I was hoping the two of us could do it for about $500?

Grand Canyon DawnI’ll give the guy the benefit of the doubt and assume that he didn’t get pricing for that flight from the concierge or see Flying M Air’s website. In other words, I’ll assume he has no idea what Flying M Air charges for a trip like that.

So let’s look at what this particular trip entails.

  • Exclusive use of a helicopter for more than 8 hours in the same day. (In other words, no other flight will likely be possible that day.) It should be noted that this aircraft cost $350,000 to acquire and has annual insurance and maintenance costs of about $20,000 to $25,000.
  • A properly certificated pilot with 2,800 hours experience and about $50,000 worth of training, also occupied for the entire day.
  • 30 to 60 minutes prepping the aircraft for flight and meeting the passengers.
  • A 90 minute scenic flight from North Phoenix to the Grand Canyon.
  • Ground transportation into the park.
  • Park entrance fee.
  • Up to four hours of waiting time for the pilot while the passengers enjoy the view from the rim.
  • Another 90-minute scenic flight back to Phoenix.
  • 30 minutes post-flighting the aircraft.

Don’t you think that’s worth more than $500?

Even if my hourly operating costs were zero — and I assure you that they’re much higher than that — at $500 I’d have to fly every single day, without personal compensation, for nearly two full years just to bring in enough revenue to cover the acquisition costs of the aircraft.

The reality is that $500 doesn’t even put a dent in my hourly operating costs for three hours of flight time. So I’d be doing the flight at a serious loss.

It it really possible that these people have no concept of what it costs to own and operate a helicopter?

My response was polite but to the point:

No, I’m sorry. That’s not possible. Our trips to the Grand Canyon start at $1,695 per flight (not per person). It’s a three-hour round trip flight with up to four hours on the ground. We are not permitted to overfly the Grand Canyon.

We offer a tour of Phoenix from Deer Valley airport for $495 per flight. It’s about an hour long and covers most of the Phoenix area.

You can find more information about all of our services, including pricing, at http://www.flyingmair.com/.

What’s interesting about this is that I’m one of the few helicopter operators based in Phoenix that will even make the flight from Phoenix to the Grand Canyon. Most operators either aren’t Part 135 (which is required for a flight like this) or don’t want to take their aircraft offline for a whole day. The few that do charge a heck of a lot more than I do. I guess what I’m saying is that not only is it impossible for them to find such a flight for two for $500, but I’m likely the cheapest option around.

But it bothers me that people think I’m making a windfall on every flight I conduct. I’m not. I’m just asking for what I consider fair compensation for the use of my aircraft and my personal services.

If it’s too much, I’m sorry — but my prices are firm and that’s the way it is.

I’ll serve the folks who can afford my services and appreciate what they’re getting for their money.

Two Ways to Hasten the Demise of Groupon and Its Clones

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Enough is enough already.

I hate Groupon. That should be clear by now. I think that any business that can bring in more revenue than the businesses that it “serves” is a leech and not a “marketing partner.” While they’re telling merchants how they’re getting “risk free advertising,” they’re selling to cheapskate customers, most of whom will only buy at the 50% (or more) discount Groupon requires. Good luck selling again to those folks at retail.

So it pisses me off to no end when I get a call from yet another Groupon clone. This one, based in Scottsdale (supposedly; it’s more likely a franchise set up by someone suckering work-at-home dreamers) claimed to be different. I let the sales rep stumble through an explanation of how they were different before asking her (1) how many helicopter tours a person might want and (2) whether their friends would buy at retail if I’d established a history of offering 50% discounts through companies like hers. Then I told her I wasn’t interested and not to call me back. And I added her number to my growing list of telemarketer numbers on my cell phone so if she does call back from that number, my phone will ring silently and I’ll know not to answer if I happen to notice it ringing.

And after hanging up, I thought of two ways we can all work together to make Groupon and its clones go away. Be advised that I’m in a foul mood so my language is a bit NSFW in this piece.

  • Just Say “Fuck Groupon” This is the method I use. I refuse to be a Groupon (or clone) merchant and I refuse to buy Groupon (or clone) vouchers. I’m not giving them any business in any way, shape, or form. I’m also making the sales rep go through a bunch of their bullshit sales pitch when they call just to waste their time and increase the marketing costs before explaining, in no uncertain terms, what I think of their business model and “service.” (I can be a real bitch.) I’m also spreading the word about how bad they are for business and consumers by sharing links to fact-based reports from actual Groupon merchants, customers, and business analysts. (Seriously: there’s enough info out there to make one wonder how Groupon has managed to survive this long. Are there really that many suckers out there?)
  • Just Say “Fuck the Groupon Merchants” This is the method people who aren’t small business owners can easily use. Just buy as many Groupon (or clone) deals as you possibly can and then use them all up as quickly as possible — keeping in mind that a good percentage of Groupon merchants are already on the verge of bankruptcy and may not be in business if you wait. Be sure to come at the businesses’ most crowded times and complain loudly when you don’t get the service you might get if there wasn’t a half-off deal filling the place with other cheapskates just like you. Whenever possible, break the rules and use multiple vouchers to increase your discount potential. Then, if the buying experience isn’t perfect, go on Yelp or some other online rating service and give the business just one star with a review that exaggerates how crappy it is.

Now, in my opinion, small businesses already have enough grief that they really don’t deserve to be fucked over by Groupon (or clones) and cheapskate customers. So I’m really hoping you go with the first method.

Enough said.