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Business Trends: Let’s make a deal
Seafood retailers see business blossom using Groupon coupons
By Joanne Friedrick
February 05, 2011
In October, TJ’s Seafood Market in Dallas decided to offer locals a chance at a one-day offer: Spend $20 and have the opportunity to get $50 in seafood between October and April. By midnight, nearly 3,000 shoppers had bought into the offer.
The deal was posted on Groupon, an online promotional program that brings daily coupon offers to interested consumers through its website and consumer e-mail, Facebook and Twitter accounts. Groupon, based in Chicago, was founded in November 2008 and operates in more than 300 markets globally, including 170 in North America.
For TJ’s Seafood, the decision to use Groupon as a marketing tool was made by company President Jon Alexis.
“Over 22 years we’ve done [literature] drops, TV and radio,” he says. “But this was the most successful [marketing campaign] by far. We had a record November, even with all the coupons.”
Although TJ’s has a long history in the city, this year the market was recognized by Groupon, giving it exposure to a potential new audience. “We felt it was a good time to reintroduce ourselves to the people of Dallas,” says Alexis.
The way Groupon works is merchants pay nothing up front, but rather share a portion of the proceeds from the coupon sales with Groupon.
“Groupon only makes money when the deal reaches its tipping point and enough people have bought the deal,” explains Julie Mossler, public relations and consumer marketing manager for Groupon. “Then the featured business is assured a specific number of customers to make the deal worthwhile.”
And even if people don’t buy that particular coupon, she says, “the business is exposed to thousands of potential new customers.”
Alexis says anyone who has bought his Groupon is someone who wants to shop in the store. “It’s 100 percent of people who will walk through the door,” he says.
With the TJ’s deal, half of the coupon purchase price goes to Groupon. Alexis notes that clients do have the opportunity to negotiate a deal with the online firm. Merchants also can install a cap on how many coupons are sold, says Mossler, “to ensure they can offer the best service possible and avoid being overwhelmed.”
In the first three weeks of the TJ’s deal, Alexis acknowledged “a monumental rush” that was followed by a leveling off in coupon-based business. Groupon tells its clients to expect that initial peak, as well as one close to the time the coupon expires.
As a retailer dealing in fresh product, Alexis says there is a definite challenge associated with anticipating customer demand. “We stocked up on fresh and frozen items,” he says, as well as bringing in more shelf-stable products to go with a seafood purchase. “We felt people may not want $50 of fish at once, so we gave them other options,” he says.
Alexis asked the store’s vendors for extended terms so the business wouldn’t be hit with added supply costs. “Because [product] is fresh, it does set up an operational challenge,” he says. And he encourages any other seafood retailer or restaurant that is considering this avenue to get support from vendors and staff “because you are contractually committed to do it.”
Alexis didn’t know what percentage of coupons had been redeemed by mid-December, “but Groupon said, ‘Don’t count on people not redeeming them.’”
Food is an attractive deal for Groupon overall. Restaurants account for about half of all of its business, says Mossler. “Activities and deals may vary by city, but restaurants are constant performers: Everyone likes to eat.”
Independent seafood stores and small restaurants are counted among Groupon’s clientele. “Groupon works with companies of all sizes,” she says. The key, however, “is that every business featured on Groupon is ready for the extra traffic and exposure that a run on Groupon delivers.” With new personalized deals, Mossler says companies can target specific subsets of customers and sell accordingly.
Tom Keegan, who operates Keegan’s Seafood in Cincinnati, also used Groupon to promote his store in mid-December. The 1,544 coupons sold offering $30 of seafood for a $15 investment “was way beyond my thinking of what would happen,” he says, noting his Groupon rep thought they’d sell about 1,400. “I think the next time I would set a limit,” says Keegan. Like Alexis, he also split his coupon sales with Groupon.
Because his deal dropped so close to the holidays, Keegan voiced concern over having enough inventory to satisfy the store’s regular customers along with the new Groupon clients. “I’m stocking up, and I pray they pre-order,” he says. The coupon suggested customers pre-order, but didn’t make it a prerequisite of the purchase.
“The majority of what I buy I get directly from fishermen on the dock,” he says, “so I’m going to have to make guesses on what to buy.”
The deal certainly brought attention to Keegan’s, he says, with website hits rising to nearly 21,000 the first weekend, and continuing with about 2,000 a week versus about 800 a week before the Groupon deal. Keegan spent an hour or two each night following the promotion answering e-mail from interested individuals. Groupon purchasers came from Ohio, Kentucky and Indiana, he says.
Armed with 31 pages of names collected as people cash in their coupons, Keegan plans to get their e-mail information as well as track how much extra money they spent.
Alexis also began tracking his Groupon customers, requesting their e-mail address for his mailing list and presenting them with his list of products and press coverage.
“For that 10 minutes you have them in the store, you need to create an opportunity,” says Alexis.
Another benefit of doing a Groupon deal was the “echo chamber effect” — people who were talking about it with their friends. “That’s earned advertising rather than paid advertising,” says Alexis.
Mossler says 97 percent of Groupon’s clients say they would repeat the offer again, and it’s not uncommon for merchants to build the program into their marketing budget.
Because his deal was so recent, Keegan will weigh the pros and cons of the process before deciding whether to use Groupon again, but he called it “a good experience. The publicity was well worth it.” For Alexis, Groupon was probably a one-time try. “If you do Groupon right, you shouldn’t have to do it again,” he says.
Contributing Editor Joanne Friedrick is from Portland, Maine