Scott Silvia, who runs Inner City Golf in Sydney, says he had to negotiate with StarDeals to have them pay 30% up front before he would agree to do a coupon deal.
“I negotiated with them to pay 30% up front, because normally they don’t pay any. Completely different to the other deals. I have to wait for them to send some correspondence,” he says.
Silvia argues there needs to be a primary financial payment in order for the company to deal with an influx of customers.
“I wouldn’t do the deal unless the money was paid up front, because obviously the busier we get, the more staff I have to get, and so on. There has to be that initial payment.”
But Dean McEvoy, who runs Spreets, says while his own company doesn’t run along the StarDeals model, this isn’t necessarily a bad way of operating if merchants are told what to expect.
“The gift card industry keeps unredeemed vouchers as well. It’s pretty standard – David Jones, Red Balloon, Westfield, etc, all keep funds from unredeemed vouchers because it’s an industry standard.”
However, there are some companies which acknowledge that while these deals may not deliver a financial benefit, they’re still worth doing as they give your business plenty of coverage and can create repeat customers.
Quickflix chairman Stephen Langsford says from his perspective, the StarDeals discounts have proven valuable for his fast-growing venture.
“Our participation with StarDeals has been successful from our point of view. We’re an active online marketer, we’re a retail brand and we’re keen to participate in online and offline channels. The advent of group buying has certainly been a useful place for Quickflix to, on occasion, use those channels for a specific deal.
Silvia says the deals he has conducted with StarDeals and JumpOnIt may not have given him a direct profit, he has been able to increase his customer base for a significant amount of time after the initial deals actually ran, with many visitors coming back a second or third time.
“We sell a lot of customers tickets for second visits, food and alcohol and so on. Most of them will spend money while they are here, so you need to make sure the voucher visit isn’t just a dead visit.”
“You’re basically running your business for free for six months without regular trade. We have four or five different ways we make our money, so we sell additional things like golf lessons, and so on.”
Dean McEvoy agrees, and says businesses are happy to participate in these deals as they provide them with a better type of marketing than they could obtain through traditional advertising.
“Keep in perspective that regardless of the payment terms, it’s still better than the old advertising game of forking out thousands for a local newspaper ad, or Yellow Pages ad, and getting no customers for it.”
Langsford says the deals can be a revenue raiser, but he also believes they’re more of an irregular marketing strategy.
“I think I would describe them as more of an occasional opportunity. We do a lot of marketing, and an increasing amount of brand advertising. I think group buying channels are useful but by no means are they a major channel for us.”
Those merchants burned by the fine print also warn others to pay careful attention to what exactly you’re getting yourself into.
“It can work,” Sarosh says. “But I would say ‘buyer beware’. Be careful and read the fine print just like anything else you get into.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
