White hot group buying startup Groupon faced a wave of criticism this week after the owner of a Portland, Ore. cafe claimed she lost almost $8,000 in a coupon campaign, and an Atlanta photographer accused of fraud had her Groupon listing pulled.
The owner of Posies Cafe criticized Groupon’s over zealous sales team, and the fact that her small local business was overwhelmed by customers, some of them snooty, but most of them a financial drain.
“After three months of Groupons coming through the door, I started to see the results really hurting us financially. There came a time when we literally could not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign. We literally had to take $8,000 out of our personal savings to cover payroll and rent that month. It was sickening, especially after our sales had been rising,” wrote cafe owner Jessie Burke.
Groupon founder Andrew Mason fired back in a blog post, admitting that merchants who run Groupon promotions can be overwhelmed by high customer volume, and that they provide “merchant preparation materials.” He also said that “97% of the businesses we feature ask to be featured again.”
A few days later, a deal from an Atlanta photographer was was pulled after she was accused of promoting her work with other peoples photos, sparking concerns that Groupon wasn’t vetting its merchants properly.
Groupon has been on a roll since it was founded in 2007, raising $135 million in series C funding in April, and has begun expanding into other countries. But while Groupon’s business model is lucrative and has been widely copied by other startups , it’s easy to forget that the details of this very new type of deal-ism still has plenty of kinks that need to be ironed out.