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How Much Does Groupon Charge To Sell – As part of your Merchant Agreement, all offers sold on Groupon Products are automatically subject to a fee. This fee is charged as a category-specific commission rate based on an offer’s listed price + shipping fee and is retained at the time of payment to the merchant.
Groupon Goods has a category-specific structure for commission rates. Please see the attachment for a breakdown of each category and its corresponding commission rate. Your Gateway profile will display a global default commission rate (typically = 15%). As a reminder, subcategories have their own specific commission rate. You can always download the complete Category-Specific Commission Pricing Schedule to your account via the Gateway portal under the Bulk Upload tab.
How Much Does Groupon Charge To Sell
Quadricycle; Aviation; Car care; Marine; Accessories for motorcycles and power sports; Parts; RV; To repair; Spare parts; Security; Tires and Wheels
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Bath; Bed linen and blankets; Breast-feeding; Cloth diapers; Diaper Bags; diaper accessories; Diapers; Feeding; Formula; Gear; Health and wellness; Children’s furniture and room decoration; Nursery; Pacifiers and teethers; Potty Training; Security; Skin care; handkerchiefs
Asian noodles; baby food; Baking supplies; Beans and Grains; Drinks; Bread & Bakery; Breakfast foods; Sweet; Spice; Dairy Products and Eggs; Fresh flowers; Fruits; Gourmet Food & Gifts; Herbs, Spices and Seasonings; Jams, Jellies and Pastes; Meat and Poultry; Oils Vinegars and Salad Dressings; Pantry; Pasta; Fast food; Sauces and Sauces; Seafood; Snack; Vegetables; Wine Beer and Spirits
Floors; Gutters; Hardware; Insecticides and Repellents; Kitchen and bathroom accessories; Kitchen accessories; Ladders and scaffolding; Lighting and ceiling fans; Material Handling; painting supplies; Gross Plumbing; Storage and Home; Water filtration and treatment
Boys; children’s jewelry; fashion jewelry; Fine Metal Jewelry; Jewelry of precious stones and pearls; Girls; Jewelry Accessories; Children’s Unisex; masculine
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Backyard, birding and wildlife watching; bird feeders and food; Outdoor decoration; Outdoor heaters and fire pits; External lighting; Outdoor storage; Pest control; Swimming Pools, Hot Tubs and Supplies; snow removal
Boat trips and water sports; Camping and hiking; Hunting and fishing; Sports and leisure games; outdoor clothing; Snow Sports; team sports
Action figures and toys; Arts and Crafts; Toys for babies and children; Beauty and Fashion; building and building toys; Dolls and Accessories; Dress up and costumes; Ecological and organic toys; Electronics for Children; Games; Hobbies; Gag News and Toys; Play pretend; Puppets and puppet theaters; Puzzle; Outdoor sports and games; stuffed animals and stuffed animals; VehiclesThis post was published some time ago, but you can still use the formulas below to estimate the returns or losses from using Groupon or other types of services like Groupon.
We geekly set out to do the math. We created 2 scenarios, researched sales numbers and made some calculations to predict the results.
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The data confirms that Groupon deals are significantly priced but can be profitable under the right circumstances. Think before Groupon (and think before you make any big marketing investments). Yes, data proves and disproves most conversations on the web (see list of articles on page).
Groupon will require your offer to be at least 50% off the regular price. You then must pay Groupon 50% of the purchase price (unless your bid is less than $10, in which case Groupon takes 100% of the proceeds). So, if you agree to sell a $100 Groupon for $50 after paying the Groupon $25, you only have $25 to pay wages and overhead. From The real cost of making a Groupon
SCENARIO 1: Cupcake Gourmet and Cafeteria Mary owns a cupcake shop and cafeteria with a profit margin of 18.2%. She runs a Groupon, $6 for $12 worth of candy! Groupon wants to keep the full amount (they keep the full amount if it’s less than $10), but Mary negotiates a 50/50 deal. She gets a flood of customers, a very busy few weeks, and a check for $3,000 from Groupon. As the rush subsides, some of the customers start to come back. Maria does the accounting and realizes: Some have used a groupon multiple times, increasing its cost Since her store’s profit margin is 18.2%, instead of making $2 per $12 sale, the Groupon cost $7 per sale totaling $7, 196 176 customers came back (Groupon says 22% return a second time) The cost to acquire each of those 176 customers was $41. Mary concludes that she needs 176 customers to return 20 times each ( $12 purchase) to recoup your costs. Mary still has a long way to go before turning a profit.
According to an article in the NY Times, a gourmet bakery can have margins of up to 18.2%. That’s $2 for every $12 sold. The other $10 goes towards the cost of making the dough, business overhead, etc. But now the business only receives $3 instead of the $10 needed to cover costs, so $7 is short of each sale, or approximately $7,000 cost per $1,000 Groups sold.
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Groupon’s 22% customer retention estimate (plus our previous assumptions of breakage, etc.) means that approximately 176 customers will return for every 1,000 groupons sold. And we would need each to go back 20 times and buy $12 worth of candy (176 customers X 20 purchases X $2 profit) to make up for the $7,000 loss from the original groupon.
Realistically, we would expect to see a gradual retention rate – some customers will return more often than others. In an optimistic scenario where 40% of customers return at different frequencies, it would take 10% to return 20 times, another 10% to return 11 times, and another 20% to return 5 times to recover costs.
SCENARIO 2: Diamond Ring Jewelery (Warning, this is an extreme case) João owns a jewelry store with a profit margin of 46.50% (average of the 2010 National Profit Survey by Joalheiro Nacional). John sells 500 Groupons, $250 for $500 worth of jewelry. He gets a flood of customers, a very busy few weeks, and he gets $62,500 from Groupon. After a while, some of the customers return. John does the math and sees: Half bought $750 on average, $250 more than Groupon Groupon cost $77,000 Higher sales reduced campaign cost to $12,000 88 customers came back (Groupon says 22% return a second time ) The cost to acquire each of those 88 customers was $131 John figured he only needed 50 customers to return one time ($500 purchase) to recoup his costs. John made a profit.
It’s basically the same math as the first scenario. We substitute profit margins, group value and units sold. The spreadsheet did the rest. We’ve added a new assumption, that half of people will buy 50% above the Groupon amount. That might be an exaggeration, but this whole scenario was built to be an exaggeration.
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The higher sales increased Groupon’s first visit revenue and reduced the net cost of the campaign to $11,600 (to be specific). Since the margin for each $500 sale is $233, John only needs 50 people (50 × 233 = 11650) to break even.
UPDATE (December 2010): We’ve received so many requests for help via email and sharing our spreadsheet that we’re finding it difficult (in terms of time) to help everyone, but if you write a comment or question here on the blog, we’ll be able to to answer them one by one.
During that time, we’ve also spoken to more companies and found some real Chicago stories, though everyone is a little hesitant to share their numbers. Some of them stood out:
I was walking down the street in November and a super cute hat in a clothing store caught my eye. I also noticed a sale sign and couldn’t help but walk in. Inside they had a Groupon sign, so of course I took the opportunity to ask a few questions. The owner was minding the store, as is common with many small businesses. She said she didn’t know how many Grouponers returned, she never thought to track them down. She also didn’t know how many Grouponers were new customers, but she assumed around 60% of them were. She said the Groupon was a huge success.
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I bought my hat (a lovely bamboo fiber hat, for a price I later regretted, but was more concerned about the Groupoon story) and mentioned that I was sad they were closing and moving out of the neighborhood. What I was (I’m a big believer in the good local economies they can bring to all of us). The owner was obviously uncomfortable and uttered something about hard times.
So I felt really bad to ask my big question – Since they were forced to go out of business, why did she consider the Groupon such a huge success? Maybe we’ll never know…
I frequent a somewhat exotic and very inexpensive beauty salon, mainly for their brow services (am I giving too much?). During one of my visits in early December, the owner was talking about her Groupon deal. I almost jumped out of my chair with excitement. I just had to ask her, “tell me about it” and she enthusiastically told me the whole story.
According to her, Groupon sales reps tried to convince her to get a manicure/pedicure deal, not a waxing deal.
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