Groupon offers refunds after complaints about flower deal
By Sandra Guy Business Reportersguy@suntimes.com February 17, 2011 10:13PM
GROUPON BY THE NUMBERS
** Employees: More than 4,500 worldwide, including 1,100 in Chicago. About 150 new employees are hired in Chicago each week.
** Average employee age: 25
** Subscribers: More than 60 million in 42 countries, growing at a rate of 2 million to 3 million a week.
** Merchant clients: More than 58,000 globally, growing at hundreds each day.
** Revenue and market value: neXtup Research puts yearly revenue at $920 million this year, $1.2 billion in 2012 and $1.9 billion by 2015. The research firm estimates Groupon’s market worth at $5.9 billion to $6 billion, roughly the same amount it rejected in a reported takeover offer from Google in December 2010.
Updated: September 24, 2012 6:25AM
At Groupon, the hits just keep coming.
Groupon, the Chicago-based daily-deal web phenomenon that last week pulled its Super Bowl ads amid controversy, and Downers Grove-based floral company FTD Group Inc. are offering refunds but admitting no wrongdoing in a Valentine’s promotion gone sour. Chicagoans are voicing complaints about Groupon restaurant deals, too.
Groupon customers, including Wicker Park resident Sharmila Rao, complained that they were directed to flower arrangements that were more expensive than the ones they could have purchased with a coupon code on FTD’s main website. Groupon customers were offered $20 off of an FTD flower purchase of $40 or more.
“(FTD) made only certain options available, and the bouquets weren’t the same ones offered on the regular website,” said Rao, a 37-year-old mother of children ages 3 and 6 and a program manager at a non-profit who seeks out bargains.
Rao canceled her flower order after she read customers’ online complaints.
FTD and Groupon are now crediting customers’ accounts so that Groupon users get the sale price. The companies also will make full refunds to dissatisfied customers.
Rao said she had previously gone to a restaurant that had covered up its posted menu and gave Groupon customers a menu that turned out to have higher prices than the ones listed on the restaurant’s website.
“I am a lot more discerning now in which Groupons I pick,” said Rao, who switched to Chicago web startup FineDineDeal.com because she can pick the restaurant, pre-pay and go at convenient times. “I only pick restaurant deals I know I will use and that are conveniently located. It doesn’t look awkward on a business lunch, and I’m not holding all of these pieces of paper (Groupon coupons) and figuring out when I’m going to use them.”
Groupon, a locally targeted daily deal site whose executives call a city guide, has enjoyed phenomenal growth, adding 1,500 employees in the past two months, and has attracted a worldwide fan base that has made it the leader in the $10-billion online coupon market. The market is sizzling hot now that Facebook and Google have launched their own daily-deal sites to rival Groupon — Facebook Deals and Google Offers, respectively.
While customers expressed their unhappiness in the FTD controversy, some businesses say they don’t benefit from Groupon deals, either.
Take Chicago restaurateurs Ina Pinkney and David Yanda.
Yanda, managing partner and co-owner of Zapatista, a Mexican restaurant in Chicago’s South Loop and in Northbrook, found that his initial “pleasant surprise” at selling nearly 5,000 Groupons in 24 hours turned into disillusion after the deal didn’t make money and attracted customers who repeatedly used their Groupons without returning to pay full price.
“We didn’t anticipate that we wouldn’t make money or that the Groupon purchaser wouldn’t come back to pay full price,” Yanda said.
Another problem: About 9 percent of the Groupon users copied their Groupons and used them seven or eight times to get discounted meals, though they are not supposed to use the Groupon more than once, Yanda said.
“There is no systematic way for a restaurant company our size to make sure that the person didn’t use his or her certificate more than once,” he said. “And there is no recourse to get your money back.”
Yanda said that Groupon provided him with a list of names of people who took his restaurant’s deal. He compiled his own written list of the ID numbers of each redeemed Groupon certificate.
The restaurant company ended up spending $175,000 in food and beverage during the six-month Groupon offer, which provided a $40 meal for $20. The offer ended six months ago.
“We probably lost a little bit of money,” Yanda said.
He said Zapatista participated in Groupon because of the coupon site’s positive buzz, to promote its then-new Northbrook restaurant and a need to generate traffic during the slow winter months and during a recession.
Groupon spokeswoman Julie Mossler said the company works with clients to track Groupon-certificate redemptions.
“We recently debuted an app for iPhones and iPod Touches that enable merchants to track from any handheld device,” Mossler said, adding that 96 percent of merchants who do a Groupon want to be featured again. The app interfaces with the merchant’s private page at Groupon.com, enabling the merchant to track redemption and return on investment.
Pinkney, chef-owner of Ina’s in the West Loop and a 20-year restaurant entrepreneur, said she decided against using Groupon because it didn’t make economic sense.
“If someone pays $15 for a $30 meal through a Groupon, I get one-quarter of the total price, or $7.50 (after splitting the revenue),” she said.
Pinkney said her restaurant relies mostly on breakfast and lunch business, when customers don’t usually spend extra on drinks and desserts, and it rewards customers with free parking and moderate prices already.
“We realize that it may work for some businesses but it is a disaster for restaurants,” she said. “I also think it is sad for independently owned restaurants. I would go to the owner and ask for 50-percent off if he needs the money that badly.”
Groupon investor Eric Lefkofsky said in a previous interview that couponing has proven its value, and the company has wait lists up to a year from merchants eager to participating in Groupon.
“We didn’t invent the concept of couponing,” he said. “It has proven to be, over the last several centuries, a remarkable way of getting new customers and it always will be. If people cannot manage the flow of customers, they may not be happy. It’s easy to blame Groupon or someone else. As an ad vehicle to get new customers, it is adding huge value.”
Even Groupon’s existence can spin off a new company. Lifesta, based in New York, lets people buy and sell their unused discounts from Groupon and other discount sites such as LivingSocial and Gilt Groupe.