Groupon’s First Ever Automotive Sales Deal – FAIL

Earlier this week Groupon offered its first ever deal from the automotive sales industry. LaFontaine Buick GMC Cadillac, a suburban Detroit dealership, offered $500 toward the lease or purchase of a new or pre-owned vehicle for $199, a savings of 60 percent.

The deal was set to run through Wednesday and required 10 purchases to tip but by that evening only 3 had been purchased and with only a couple of hours to go, the timer was suddenly updated to run for another day. The additional day only saw one more purchase so of course the deal never tipped.

In an article on Reuters, Ben Edelman, associate professor at Harvard Business School said, “The prospect of opening up markets like new cars and leases is attractive. To the extent they can still take 50 percent revenue share that’s more money.”

Groupon has done some other big-ticket deals recently, such as $500 off closing costs for real estate purchases, Edelman noted.

The car offering may be more problematic, he added.

“This voucher is for a very small portion of the cost of a car or lease, so it’s basically an agreement to buy or lease a car from LaFontaine,” Edelman said. “That’s poor negotiating because the dealer could take advantage of that by offering the same car for more money.”

The deal was simply not attractive enough to pull in the buyers. If the deal cost $199, the car discount was really only $301. With the price of cars these days, what part of a vehicle can you even buy for that… a couple of tires, maybe? Auto retailers are offering discounts on cars reaching into the thousands. In order to run a successful promotion LaFontaine needed to risk a lot more on this deal than they did and obviously they weren’t willing to do that.

Source: Reuters