Video by Jessie Chieh-Hsin Lin
Snatching the Deal
By Kirsten Johnson
Wallingford, Seattle—Friday night: 6 p.m. The wooden, paint-chipped door of Rain Sushi swings open. A young couple steps inside.
“Hi guys, we’re on an hour wait right now,” Brandy Smith, Rain’s owner says to them.
The pair looks around the packed restaurant—their shoulders sag. Smith smiles apologetically.
Tonight, Rain is busier than usual. This modern Japanese cuisine hot spot has just launched a “daily deal” promotion through the social coupon website Groupon– a deal in which customers purchase a $25 coupon and receive $50 worth of food. Visitors have come from all over the Seattle area to get their piece of discount tempura.
When Smith first decided to partner with Groupon she knew it would get busier—but these consistent, hour-long waits came as a surprise. But she isn’t complaining.
“We have definitely seen a lot more new faces which is good because it keeps the restaurant afloat,” she said. “I think it’s the best marketing tool we’ve been able to find.”
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Many businesses in Seattle have already tried Groupon, some multiple times. This map shows previous deals for Wallingford businesses; displaying information on what the deal was, the date of the deal and how many deals were sold. |
View Groupon in Wallingford in a larger map. Map by Almeera Anwar.
How it Works
By now you have probably come across one of these group coupon sites sweeping the internet. Services vary but generally, as on Groupon, customers sign up to an online email list and are sent a deal each day from a featured business. If enough people sign up for the deal then everyone gets it.
Customers then print the coupon out or save it onto their smart phone. They can redeem their deals as early as the next day and if the promotion expires unused, a customer may redeem the amount they paid online and get a complete refund.
An average of 70 to 90 percent of Groupons are redeemed and business owners do not pay any upfront cost to participate.
All profits from the promotion sale are split between the merchant and Groupon. The merchant’s incentive to participate is the hope that, by offering many first-time customers a very low price for a service, most will return post-deal and pay full price for the same service.
A belief that this business strategy works is key to Groupons’ success, “Groupon will shine a great big spotlight on your business,” said Chad Nason, a Groupon Representative.
Smith has seen this happen firsthand.
“It’s brought people in from outside the neighborhood,” Smith said. “We’ve had people who have told us they came as far as Tacoma just to try the restaurant—that’s probably one of the most positive things we’ve had with these deals.”
A Game Changer
Groupon is the first and only daily deal site that Smith has tried out so far. When she first opened Rain seven years ago, she envisioned creating a personable, family-like dining experience—one that would encourage customers to become “regulars.” But she soon realized that in order to consistently pay the bills, she needed more new customers.
“What we hear from a lot of merchants is, ‘if we could just get somebody in the door, I know we could impress them,’” said Nason.
Rain’s very first offer sold over 2,500 coupons. On a night when she’s running a promotion, she typically sees 60 percent of her customers using a deal. But the formula doesn’t always work perfectly says Smith,
“It’s a little stressful dealing with people that are here not necessarily for the dining experience but to use their Groupons,” Smith said. “You want to try and get return customers and it’s becoming more evident that it is a very difficult thing to do.”
While Smith doesn’t have exact figures of her profits from Groupon, she estimates after the loss from the coupons factor in, it evens out to be roughly the same as before. The publicity alone, she says, makes the partnership worthwhile.
“It’s a good opportunity to get the business’ name out there,” says Smith but be prepared for an influx of people.”
Other Options
Groupon is not the only online coupon game in town. Just down the street from Rain, Smash Wine Bar and Bistro has tried out a whole host of coupon deals. Dana Hanon, the owner, has used Living Social, restaurant.com, Sugar Pop and Bloomspot—just to name a few.
There are over 500 daily deal websites around the world but Living Social is Groupon’s primary business competitor. Hanon says she’s had the best experience with this rival company in particular. Launched in 2007, a full year before Groupon, Living Social is popular in Seattle but earns less global profit than Groupon. Living Social has just 10 million subscribers worldwide, as compared to Groupon’s 40 million.
But Living Social is a fast growing competitor. In 2011, they are projected to book over $500 million in revenue—nearly double their current market presence. Groupon, however, is projected to earn just $460 million in 2011.
From Hanon’s experience, Living Social customers seem more likely to become long-term guests and she has noticed they spend up to 30 percent more per bill.
Also, Living Social takes just 40 percent of her profits at the end of a deal, whereas Groupon keeps half. Danon also says that Living Social has allowed her to easily access figures online and access customer feedback in ways that Groupon does not.
Hanon only prefers Groupon’s payment method: while Living Social pays her in a single lump sum one month after a deal ends, Groupon pay merchants in three installments, the first being the day after the deal closes, the last being 60 days post-deal.
Hanon advises new businesses to simply do their homework when deciding whether to partner with a daily deal company. Services, such as hair colorings or restaurant meals, make for great promotions because of their potential for markup. Products do not.
“It’s a great thing to promote your business but I don’t think it’s for everyone,” she said. “You need to look at the numbers very carefully before you do it. It will definitely get your name out there.”
Daily Deal sites in Seattle
Compiled by Almeera Anwar
LivingSocial
Offers a daily deal for purchase; can be up to 90% off regular price, focuses on restaurants, bars, spas, and theaters. Deals can also be trips or adventures, deals for families and discounted gifts in the Holiday season. If you can get three friends to purchase the same deal, your deal becomes free.
Scoutmob
Offers coupons for free; if you want the coupon you click to get it via email, text or through the smartphone app. No payment needed, just the coupon, with some restrictions.
Note: New to Seattle, many of the deals are food-related and only offering one new deal a week, for now.
DailyDeal with Seattle PI
Offers a daily deal for purchase; can be up to 90% off regular price, focuses on restaurants, spas, events and other local goodies. Purchased deals are emailed and must be printed in order to use them. Some deals are also given away through an “enter to win” contest, then that deal is free for the winner.
Tippr
Offers a daily deal for purchase, usually aimed towards collective buying at local restaurants, spas, retail shops, city events, bar, and theaters; discounts run from 50% – 90%. Deals are usually available for one to three days. Can get $5 credits it friends create an account.
MyDealBag
Offers a complete listing of all the deals offered that day in Seattle. They offer multiple search features, designed to help the customer to search deals based on what they are looking for.