A Groupon Nightmare

Groupon ran a deal last year with a company called “The Laser Genie” based out of Beverly Hills, CA.  The deal was almost too good to be true and almost 3,000 people purchased it.  A $2,000 package at The Laser Genie, for $99.  That’s right, a 95% discount. The deal was titled:  “$99 for Six Body-Contouring Treatments and Four Small-Area Laser Hair-Removal Treatments from The Laser Genie”

As you can see from the emails below, the merchant isn’t pleased and calls it the worst nightmare she has ever had as a business owner.

I spoke with Julie Mossler at Groupon and she provided me with some additional detail about the deal.

Groupon sets a target number of sales with each merchant, based upon the business and product, and using historical data to help determine what kind of volume a particular deal can support. Keep in mind, Groupon is in the business of selling, and if a merchant is insisting they can support the volume levels, why wouldn’t they allow a deal to continue? After all thats exactly what their business model is.

In this particular case, several things happened to create a perfect storm effect leaving  many people unhappy. The deal had a target of 2,000 total to be sold, and late into the evening it was around 1,800.  So the staff at Groupon let the deal continue and essentially “went to bed.”  The deal however outperformed expectations and sold an additional 1,000+ groupons overnight closing at a grand total of 3,247 sold. In the morning Groupon checked in with The Laser Genie to see if they could support the additional sales. The Laser Genie said yes. Mistake number one.

The very next day, as the merchant got slammed with business, their reservation system crashed further complicating matters.  Mistake number two. What happened next is still kind of murky to us, but it seems the merchant starting changing the deal terms with customers and the complaints began to roll in.

Groupon immediately saw a potential problem and started emailing customers directly offering refunds.  Julie says that around 1,000 refunds were eventually issued. Now you have mass confusion, leaving The Laser Genie to deal with customers without a clear indication of who has been refunded and who’s a real customer, leaving customers obviously confused and upset.  Mistake number three.

The first thing that comes to mind when I see these types of deals is how in the world can the merchant afford this? Was this a real price in the first place?  How can they sell $300,000 worth of a deal like this without thinking that something could go wrong?

According to Julie, the Merchant Services side of the business has really grown up in the past year to avoid problems just like this. I have seen a copy of Groupon’s new merchant agreement and it does require additional credit checks from merchants that expect to do over $50,000 in business with them. So measures are clearly being implemented and tested.

It’s easy to blame Groupon here and you can clearly see the frustration below from the merchant. But Groupon is in the business of generating sales, and ultimately its the merchants responsibility to be able to deliver the goods and services.

The Laser Genie does have a lot of negative reviews from this deal and says its reputation has been tarnished. It’s tough to pinpoint individual blame here nor is that the intention.  Merchants need to be properly educated prior to running deals and not get lost in the potential dollar signs.  Groupon needs to continue implementing measures to help the merchant through the process and protect the customers, which they are trying to do. In my opinion they stand head and shoulders above LivingSocial who is quickly gaining the reputation of running some bad deals with bad merchants. I’ll save that story for another day.

Links to some of complaints:  City Search Insider Pages

First email from Rose, The Laser Genie:

Second email: