The most commonly asked question we’ve gotten over the last few weeks is “Why did you guys pick a fight with Groupon?”
The short answer?
We actually CARE about local business.
The long answer?
The truth is it has nothing to do with Groupon as a company, as people, or as a ticker symbol on the stock market. The biggest problem is their business model and their casualties…
Did you know that when you use a Groupon you could actually be hurting a local business more than helping them?
How? It’s no secret they want businesses to give away their product at a 50% (or more) discount, but what most users don’t know is then they will take roughly a 50% commission of that. The majority of local businesses can’t afford to sell something for 25% of their regular price and still make a profit… And yes, local businesses may get you to come in, but at a STEEP cost, and with very little control.
Imagine your favorite restaurant sells an entree for $12, and their food cost is $4. Now imagine Groupon comes in and persuades them to sell it for a 50% discount. The business is now selling the same entree for $6. Groupon takes about a 50% commission, which means the business would give away around $3 to Groupon. Leaving them to net $3 from the Groupon deal. However, if the business has a cost of $4, they’re actually LOSING $1 per Groupon deal.There are a multitude of first hand accounts from business owners who filed, or nearly did, for bankruptcy from the Groupon business model. It is not sustainable for business owners. As well as an outstanding number of Groupon purchasers who have not been satisfied with the service. Not to mention the Groupon-ers who only go for the discount and never intend to return or spend more then the deal they paid for.
Why does this matter?
We all live in a town or in a city that has local business owners. Maybe you personally know someone who is a business owner, or you might own your very own business! Ever since Groupon went public, the only thing that matters to them is quarterly earnings and keeping shareholders happy. Their soul was sold on the stock market years ago. They no longer care about the local businesses, but only what that local business is worth to them. They don’t see the business owner who left their job and is pursuing her dream to open the best local flower shop. Or the man who lost his job in 2008 which spurred him to open his own steakhouse and is just trying to get his customers to come back more than once a month. They don’t care about the Yoga Studio run by two college friends who opened it so they could teach people how to find peace in their life and improve their physical health. We could go on, but you get the point. Groupon cares about ONE thing, PROFIT! Cyphr cares about ONE thing, LOCAL BUSINESS!
Cyphr was built because we want to provide those local business owners the best option to compete against national brands for their favorite customer’s attention.
Users shouldn’t have to pay for something up front, and businesses shouldn’t have to wait months to get their money from Groupon. The User should pay the business directly. You don’t go into a restaurant, eat $40 worth of food and say “I’ll have someone pay you in a few months,” do you? (if you do, can we go to dinner with you?)
Stop killing local businesses, stop using Groupon.