Local shops nationwide are pulling in thousands of new customers with group coupons online, but the deals can sometimes work too well, turning marketing into a game of retail roulette.
Some of the nail salons, restaurants and other small shops that have sold the coupons have risked both new and existing business as they struggled to handle the surge in clients.
For Crystal Nail Salon in Chicago, ratings at websites like Yelp.com tumbled as owner Phu Bui struggled to serve up the 5,100 manicure-pedicure combinations he sold in June for 65 percent off.
"All of a sudden it went over the edge of my expectations, so I'm a little overwhelmed," Bui says. Some patrons complained of long waits, inadequate treatments and feeling rushed.
Chicago-based Groupon, credited with creating the group discount concept and still the ballooning trend's leader, typically keeps half the coupon's selling price and charges retailers a processing fee. It e-mails deals daily to 11 million shoppers in 150 cities - including Tucson - in 19 countries and this month started tweeting about group deals to many millions more.
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The messages, which cost retailers little up front, typically promote a service at a significant discount and require a minimum number of participants (the group) to take effect. Being available for only a day or two - and often to a limited number of people - gives them an added sense of urgency.
Scores of websites besides Groupon offer similar deals, including buywithme.com, which offers deals in cities including Phoenix, and livingsocial.com, whose website says its daily deals are "coming soon to Tucson."
"If you're prepared, it can be a really great thing," says Tony Gordon, who offered coupons for half-price massages through Groupon.com in December. "If you haven't used your foresight or you haven't extrapolated what's going to occur, it could kill your business."
Groupon suggested he add workers to book appointments, Gordon says, and he later hired four new therapists and expanded his Chicago salon. He says he achieved his goal of creating new long-term customers of some of the nearly 3,200 people who bought the discounts. But the gamble was expensive: His shop received less than $20 for each massage, compared with the normal $84.
At Bikram Yoga Milwaukee, owner Bron Gacki had a very un-yoga reaction last month after selling nearly 2,500 Groupon coupons, when he expected to sell 1,000. He almost panicked.
"What if 2,500 people show up tomorrow? What's going to happen?" he recalls thinking.
Gacki and his employees have worked extra hours signing up new customers for five classes for $15, a steal compared with the usual $90. Classes are 20 percent to 50 percent bigger.
CEO and founder Andrew Mason of Groupon says the company explains the risk shops take when they sign on. It tells its 30,000 clients not to expect to turn a profit on the deals and suggests they limit the number of coupons they sell. The company also thinks the risk of drawing too many customers will ease as it starts drilling down to offer coupons tailored to neighborhoods and smaller cities.