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How to Use Groupon to Boost Your Ecommerce Business

What many online retailers don't know is that Chicago-based Groupon goes beyond these types of local deals and provides ecommerce business owners with tools and services to cash in on the Groupon craze.

Giving Local Businesses an Online Presence

Launched in November 2008, Groupon leverages collective buying power to offer huge discounts, which are the result of partnering with small business owners who offer the deals. The featured deal-and the business offering it-can be discovered by more than 36 million active Groupon customers through Groupon.com or the mobile Groupon app. For these deals, customers buy the discount certificate and redeem it on their next visit to the business.

The actual cost of running a Groupon is typically a 50-50 split between Groupon and the merchant. For example, if you offer a deal in which consumers spend $25 to get $50 to spend at your restaurant, $12.50 of the deal purchase price goes to Groupon and $12.50 to your business. The promotional value is the responsibility of the merchant.

News: What a Groupon Deal! $12,500 IT Consulting Discount

Nicholas Halliwell, Groupon's manager of merchant public relations, says the company helps merchant partners structure the best deal and put strategies in place to manage the increase in customers and sales. This includes steps such as setting the right deal price and making sure you have considered what additional staff or stock will be needed.

According to Halliwell, a successful Groupon experience requires planning. "Typically what we see-and what we prepare merchants for&mdasdh;is a lot of customers at the beginning of the redemption phase and a lot toward the end right before the extra value is about to expire," he says.

How Can an Ecommerce Owner Use Groupon?

Without a brick-and-mortar location, an online-only business doesn't fit the bill for a typical Groupon deal, since there's no physical place for customers to visit and redeem the certificate. However, Groupon does offer value for online merchants by going beyond local deals and providing ecommerce business owners with a way to cash in on the Groupon craze.

Study: In-Store Shopping Most Trusted, But Buying Online is Overall Favorite

Groupon Goods, available through the Grouponworks.com site, is a deals program designed for businesses that don't have a local store. This consumer products channel is for buying items such as electronics, beauty, home and garden, toys or even sports items.

In explaining how the marketing promotion works, Halliwell describes Groupon Goods as a "conduit," adding, "You buy the product from the merchant but it goes through Groupon."

Since this is a bit different than the daily deals set-up for local merchants, Groupon will work with an online retailer to determine how many items will be made available. A third-party vendor will retrieve the items from the merchant's warehouse and then pack and ship the items to individual customers on behalf of Groupon, who also handles all returns and customer service for the promotion.

Making Groupon Goods Work for You

So far, Groupon Goods appears to be popular with online merchants. Marlon Wilson, owner of the online retail site Exclusive Phone Skins, has already experienced Groupon Goods and is looking forward to running a second deal.

Exclusive Phone Skins saw gross monthly sales increase from about $3,000 to $40,000 during a Groupon Goods promotion.

Wilson started Exclusive Phone Skins in March 2011 as an outfit for selling iPhone and other smartphone cases and accessories online. As a small part-time business, Wilson says he typically did $3,000 per month in sales.

"I'm a customer of Groupon myself, and, since I love the email deals, I started thinking about&how I could offer a Groupon for my own business," he says.

Knowing he could pick up the extra inventory, Wilson got in touch. After reaching out to Groupon, the company did a background check and verified that the inventory was available. (Wilson had to purchase the inventory after negotiating the maximum units to be made available to Groupon and agree on a deal price.)

The deal Exclusive Phone Skins offered was 60 percent off and free shipping. With Groupon Goods, gross sales increased to $40,000 in one month, Wilson says.

For an online retailer considering a Groupon Goods, Wilson recommends that you prepare for an increase in traffic. Groupon has more than 36 million email subscribers-when the deal runs, you have to be ready to please every customer who purchases a voucher.

Another downside: Since the transaction is handled by Groupon on behalf of its customers, you don't have access to the buyer's data, so there are no email addresses to add to your marketing list. However, after Wilson's promotion ended, he says his Web store benefited from regular increased daily traffic, as well as sales on other products that were not included in the deal.

How to Know If Groupon Is Right for Your Business

There's been a lot of talk about Groupon, both good and bad. Some merchants found they weren't prepared for the influx of customers. Others say Groupon is expensive. There's also the large group of merchants satisfied with the Groupon marketing deal.

Groupon does seem to be listening to its merchant partners. In addition to the Groupon Goods option for online retailers, the company also launched a Merchant Center to give small business partners a snapshot of their featured deals and see customers' demographics information, including age, sex and ZIP codes. There's also Groupon Now, which is designed to let merchants set the time of day for redemption during off-peak hours, and Groupon Rewards, which helps build customer loyalty with consumers who buy your Groupon deal.

There's no doubt that using Groupon is attractive to small businesses, mainly because the company run most aspects of the campaign for you. Ecommerce business owners need to do their research first, though. Look at your bottom line and determine if you will still profit after costs, make sure you can handle the increase in traffic and, finally, decide if offering a huge discount deal will benefit your business in the long run.

Based in Nova Scotia, Canada, Vangie Beal has been covering small business, electronic commerce and Internet technology for more than a decade. You can tweet with her online @AuroraGG. Follow everything from CIO.com on Twitter @CIOonline, on Facebook, and on Google +.

Read more about e-commerce in CIO's E-commerce Drilldown.


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