“Even if this photographer is doing each job to a bare minimum standard, he has committed himself to nearly a year’s work for no money. If that doesn’t sound like good business sense to you then be very careful if you decide to offer a deal through Groupon or any similar site. What may at first seem like success could very easily put you out of business.” -Andrew Smith, Beware of the Groupon piranhas eating you alive!
I’ve been reading a bit recently about backlash from businesses against Groupon’s business model. Groupon partners with businesses to offer discounted goods and services through an online coupon; the idea is that selling many more of your product at reduced prices with Groupon’s ready-to-buy mob of consumers will benefit your business. Most often, businesses have delusions of glorious and repeat financial return after an initial discount when, in fact, they find themselves delivering goods to one-time deal-seakers at 25% of their usual revenue. Groupon takes 50% of the money from the 50% discounts offered at on the site. Here’s one such case described by a Portland, Oregon, bakery.
I’ve heard tell of photographers offering discount wedding/portrait/headshot packages on Groupon or other deal sites, and find myself wondering how it works out financially. Andrew Smith took a look at one such deal and did the math using estimates for time, travel, and prints offered in a £29 Groupon deal (discounted from £200) for a 1-hour photo shoot offered in Bristol, UK. 301 people bought the deal.
First, Groupon gets half of the sale price, so the photographer gets £14.50. The coupons can be used at any location within 15 miles of Bristol city center, so factor in an hour and a half for travel and location setup and teardown and the cost of publication transportation or gas and car maintenance. The photographer also promises a DVD of all images taken, 20 images toned, and 11 prints (1 framed). At a minimum, that’s 4 or 5 hours of work, costs of printing and burning, and delivery of the finished product for a total £14.50 (less if paid by credit card).
The photographer has committed him or herself to doing 301 of these packages. Factor in scheduling conflicts, weekends, and holidays, and that’s well over a year’s work and the bare minimum costs for the shoot might be covered. Then there’s taxes, insurance, equipment, and other general costs of doing business that must be considered. The end result of all of this is a year or more’s work, and each shoot will cost the photographer money.
Groupon’s take, on the other hand, is much better. They’ve provided the photographer with the infrastructure for advertising and e-commerce, but that cost is spread across the thousands and thousands of such deals. Each individual deal costs very little to Groupon, and they see the same revenue as the person providing the service.
One might argue that there’s value in having 301 new (and possibly repeat) clients spreading word of mouth advertising about your work and showing friends and family the pictures you took, but every one of those conversations will involve some variant of the phrase “And I got it all for under £30!” If other businesses experiences with Groupon are any indication (linked in the first paragraph), these customers will not return, especially not at full price.