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The Growth of Groupon

The online group-buying venture can bring in the customers but participating retailers aren't sure if the results improve their bottom line.
August 18, 2010

CHICAGO - Groupon, the online group-buying venture, has grown to big business, but small businesses it partners with have experienced varying degrees of success, the Chicago Tribune reports.

Basically, Groupon works by contracting with a business to offer a deal to a group of consumers. The catch is that the deal is only good if a certain number of people sign up for it. The business usually splits the revenue 50/50 with Groupon.

Greg Gibbs, owner of Chicago Bagel Authority, partnered with Groupon in January to offer an $8 voucher for $3, good for any menu item. Close to 10,000 Groupons sold, more than 10 times Gibb��s expectations.

"This will end up being the year of the Groupon for us, and that��s not a good thing," he said. "We��ll count it as a loss." The store made around $15,000 on $80,000 worth of food and Gibbs said his business hasn��t seen repeat customers from the deal.

"We just don��t get the kind of customer that we want to come back," said Gibbs, who noted that guests replaced items if the total went over $8. "It��s a lot of people that come once for the discount, nobody tips, and they��re all trying to squeeze it into the exact dollar amount."

Groupon spokeswoman Julie Mossler said the business has many approaches to handle its growing operations and keep small businesses and consumers happy. "We certainly believe in learning from past experiences," she said. "We��ve had (sales) representatives go through even more detailed training in terms of different recommendations they can make."

Groupon offers personalized deals in six cities, including Chicago, that asks subscribers for gender and ZIP code to let merchants target specific groups of subscribers. This way, businesses can only handle a couple hundred new consumers to participate.