Commentary about Groupon and LivingSocial sites

The following is a guest post by Michael Koploy, ERP Analyst at Software Advice. Software Advice provides reviews and comparisons of <a href=”“>POS software systems. Michael also writes about business software and retail trends for the Software Advice blog.
Whether it’s a hot new local eatery or a up-and-coming massage parlor, chances are small businesses in your area have jumped onto the social daily deals bandwagon. Groupon, along with Living Social and other popular deal sites have launched a new wave of deep discounting and social marketing for local retailers. But is a Groupon promotion right for everyone?
Groupon has received a decent amount of bad press over the past few months. Horror stories have cropped up on the Internet of retailers being unable to meet the demand of their voucher purchasers. Some have had to take out loans just to make up for the lost revenue after a Groupon promotion. While Groupon could possibly do more to help retailers that have a hard time understanding the model, it’s up to retailers to know their limits when it comes to using Groupon.
So what should retailers know about Groupon before deciding if a daily deal is right for them? Here’s a rundown of how Groupon works for retailer:

A voucher for a 50-90 percent off promotion is placed on Groupon’s website, app, and email marketing list. Groupon will promote the voucher to members of your local community.

Two things can happen at this point:
 a) The deal does not reach “critical mass,” resulting in the few that purchased the
voucher to be reimbursed, and your retail business receiving free online advertising.
 b) Enough vouchers are purchased, and then… “the deal is on.”
At this point, Groupon will receive a cut of around 30-60 percent, depending on the preset conditions of the negotiation between Groupon and you. Groupon pays out your cut of the deal – minus credit card processing fees – in three installments over 90 days.
So what do you receive in return for selling your inventory for approximately 75 percent off? Repeat customers and local promotion, says Groupon. But simply participating in a deal doesn’t do either of these things. To encourage customer retention and spread the work about your business, retailers must go beyond the minimum of the Groupon promotion and provide additional return incentives for their voucher redeemers, as well as taking down contact information for future promotion.
So should you Groupon, or not? Having a firm grasp of your business’s finances and current marketing initiatives will answer that question. Here are the main types of retail software solutions that can help:
Retail customer relationship management (CRM) software</strong>. Are your current marketing efforts enough? Will a Groupon promotion actually improve your website and brand’s social standing in your community? Having CRM software automate and measure your online marketing efforts is the best way to manage these operations. <a href=”“></a> is a great choice for smaller retailers. Larger retailers that want an integrated solution can use a system like <a href=”“>CounterPoint POS.
Retail inventory software</strong>. Groupon is great at selling of your inventory if it’s perishable. An example of this is in the food service industry, or other industries that sell large amounts of inventory at high profit margins. If you’re looking for new retail software, be sure to look at systems that have advanced inventory management functionality to help predict demand and manage inventory stock levels.
<li><strong>Retail accounting software</strong>. Most retailers’ software experience begins with accounting software like <a href=”“>QuickBooks</a> or <a href=”“>Sage Peachtree</a>. These are great systems for many small retailers. For retailers that need more advanced accounting features, many retail point of sale solutions include advanced accounting features. For some great numbers to crunch on this topic, be sure to read <a href=”“>this</a> Techcrunch article.
For more on this topic, check out <a href=”“>Retail Software: Your Groupon Advisor
Michael Koploy
ERP Analyst
Software Advice
(512) 364-0129

By the way, we’re hiring

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