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Small Business and Groupon: Not a Good Match?

By Tanya Roth, Esq. on September 20, 2010 | Last updated on March 21, 2019

Small business and Groupon: owners are talking about the online company; the benefits, the drawbacks and the out and out fakes. A story has been reported this week about a small business owner, an Atlanta photographer, who is being accused of promoting a fake deal on Groupon. According to the complaints of Groupon customers, the photographer couldn't live up to the terms of the deal and what is more, may have been promoting her site with pictures she did not own.

Photographer Dana Dawes is dealing with complaints and allegations that her work is not her own and that she cannot possibly live up to the deal she sold on Groupon which earned her about $76,000 according to PetaPixel. Whether it is a case of fraud or just serious misjudgment about the ability of her small business to deliver such a volume of work is just one question. As one photographer who commented on the deal said, "Groupon - one major clue that the business is fraudulent is if they offer a deal like this, that cannot be physically fulfilled by a true professional photographer ... It is physically impossible for a pro photog full time to do 1,000 sessions in a year (and on location at that)."

This raises the general question of small business and Groupon - how well does this partnership really work? Groupon is an online coupon type of service that offers discounted deals on goods and services through "collective buying power." As their website explains, Groupon features bargains on things to "do, see, eat, and buy" in cities across the country. By promising businesses a minimum number of customers, Groupon arranges for unusual discounts for their purchasers.

In order to make a Groupon deal work, a true small business may have to cap their deal to avoid taking on more than they can cope with. But small business owners cannot count on Groupon to be the safety net for this issue. The responsibility for running the numbers is on the business owner. Groupon representative Julie Mossler told TechCrunch: "We've always offered merchants the ability to cap their deals ... Some choose to use a cap, and some don't. The businesses that find success on Groupon are those who are honest with themselves, know their books and aim for a manageable number of customers."

One owner of a small restaurant told TechCrunch they lost almost $8,000 after three months of Groupon participants eating at their diner. Sales were up, but the profits took a hit. To make discounts in any form work for a small business, consider your margins carefully before chasing the big sales numbers. It may not add up.

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