Much has been written about the value of Groupon and its power to drive traffic to participating retailers. The hope is that new consumers will try your store and buy additional items, above and beyond the promoted item or coupon threshold.
However, what if consumers come to your business and simply buy the item on offer? The Wall Street Journal recently reported on a toy retailer that had offered $20 worth of merchandise for $10. Most consumers bought just the minimum amount needed to redeem the coupon. According to the Journal, the toy company lost money on 75% of its Groupon sales. Further, most of the customers who used the coupon were existing customers. While this is just one story, it is a cautionary tale.
It is important to drive incremental trips and often coupons, discounts, and loyalty reward certificates are an effective means of doing so. However, it is also important that these trips at least break even.