With the entry of Groupon into auto retailing, dealers kept their breaths while waiting to see if the online coupon phenomenon would attract shoppers into showrooms. So far, the customers haven’t poured in.
At the LaFontaine Buick-GMC-Cadillac in Highland, Mich., just four consumers agreed to pay $200 for a $500 discount voucher to buy a new vehicle. A minimum of 10 was set by Groupon and LaFontaine for the vouchers that will be issued.
To make the deal more appealing, the dealership and Groupon extended the offer from the original two days to four. It also studied reducing the number of consumers that it required.
This unenthusiastic response indicates that the online coupon fad doesn’t naturally fit auto retailing. The success of Groupon stems from offering daily deals at local small-ticket retailers, spas and hotels to over 80 million members.
Groupon offers a huge number of these discounts for 50 to 60% off. It works like this: Groupon sends out an e-mail alert, offering a coupon for local bakery goodies valued at $12 but would only cost the customer $5.
The bakery honors up to 400 coupons through Thursday on the condition that a minimum of 50 consumers sign up. The bakery realizes that it will lose some money but it aims to attract enough new customers who will go back later and make the discount worthwhile.
If a sufficient number of people sign up, $5 is charged by Groupon to their credit cards. The bakery gets paid $2.50. But no one gets the coupon if there aren’t enough people to sign up. Groupon was effective at promoting the service business of the auto industry. This is what led many to believe that it might be successful too for vehicle sales.