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Groupon forays into car vouchers

July 21, 2011
Online coupon giant Groupon this month launched its first effort to get into big-ticket retail, with a $500 voucher toward a new-car sale at a Michigan dealership. But Groupon attracted only four buyers.
For $199, LaFontaine Buick-GMC-Cadillac of Highland, Mich., offered customers a $500 voucher toward a vehicle purchase. The four-day promotion enticed four consumers, two of whom ultimately bought a vehicle.
Deals offered through Groupon have to sell a minimum number of vouchers in order for the coupons to be valid. In LaFontaine’s case, 10 customers needed to make the purchase during the original two-day sale offered July 12-13. The deal was extended after not seeing much traffic, but still only attracted four buyers. Although technically invalid, the dealership honored the vouchers for the two customers who showed up to purchase vehicles.
An Automotive News report proposed several reasons why the deal was a flop as opposed to other wildly successful Groupon sales. First, customers of daily deal sites are accustomed to hefty discounts, so consumers “may have dismissed $500 off on a $30,000 car as not enough.” Also, most deals are offered on products that have a fixed price that consumers can verify. Milner said, “Consumers were skeptical, thinking the dealership would boost the price to offset the $500 discount.”
Groupon promotions need to sell well in order for retailers to break even, since they are losing money on the deep discount. The real payoff is if deal customers return to the business for future purchases.
Although the initial offering was unsuccessful, Groupon doesn’t plan to give up on the big retail market. Groupon spokesman Chad Nason told Automotive News, “We’ll look at what this deal did and tinker with what we can do in the future.”