It's cool for a business to use GroupOn, but does it hurt profits?


The jury is still out, but the increasing habit among retail clients to offer "daily discounts" is anecdotally contributing to decreased cashflow.

One appraiser BVR spoke with recently said he'd done a valuation for a local clothing retailer who had seen operating profits drop by half due to increased use of the discounts.   Apparently, the owners' offers through GroupOn had brought new customers into the store who had purchased deeply discounted items--so this was good.   But it also turned out that many of the store's best customers started taking advantage of the discounts.   So, their most profitable shoppers started buying at cost--or less.

Appraisers should probably look carefully at results before concluding that the use of these automated shopping technologies is going to fuel growth for retailers...in some cases it may, but in some cases it is clearly counterproductive.


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