Should Green Retailers Try Groupon?

A few posts back, we suggested that starting a Green Groupon -- a daily group deals service devoted exclusively to eco-friendly products and services -- might be a very tough row to hoe. In short, too few "green-only" consumers makes it very challenging to garner the massive traffic required to make the Groupon business model work.

But does that also mean that green businesses shouldn't try Groupon (or any of the Groupon clones?)

Absolutely not. Without question, green retailers should hustle on over to Groupon and advertise a deal. Mainstream consumer sites are exactly where green retailers need to be in order to increase brand awareness of their stores and their products. Yes, targeted advertising to green consumers is important, but remember, this group is not a monolith. According to this 2009 study by Grail Research:

85% of US consumers have bought green products and nearly all of them will not revert their course. However, only 8% of consumers choose to buy green products for the majority of their purchases (the ‘dark green’ consumers).

So if your marketing efforts are too targeted, directed only at dark green consumers, you will have a hard time generating sufficient traffic (whether it's on-line or on-foot) to generate sufficient sales. But there is enormous potential to make inroads among that 85% who are "open-to-green", especially if you operate in a green-savvy urban area (like Portland, San Francisco, Chicago), and/or your store is online.

Let's look at an example.

The Green Rainbow Shop is an Oakland-based eco-boutique with an e-commerce shop as well. Recently, Green Rainbow used Groupon to offer "$40 worth of Eco-Goods for $20", redeemable at its online store only. A minimum of 20 shoppers were required for the deal to kick in (that's the way Groupon works.) This deal was promoted through Groupon's San Francisco email list.

The results?

239 vouchers sold for total revenue of $4780, of which Groupon takes half. Did the deal eat into Green Rainbow's profit margin? Obviously. But think about how much paid advertising would have been required to generate 239 sales. Assume that a Google ad will yield 1 sale for every 100 clicks, and a click costs a dollar (which is in the ballpark for keywords like "eco-friendly" and "organic".) That's a $100 ad buy just to make one sale.  At that rate, 239 sales would cost $23,900.

In short, when you consider participating in a program like Groupon you have to weigh any revenue losses against typical marketing and advertising costs. And remember, aside from sales per-se, there is the enormous brand exposure you will gain from being the featured business in the daily Groupon email, which surely goes out to tens if not hundreds of thousands of subscribers. 

What percentage of your Groupon customers will repeat and will they be willing to pay full price?  Those questions remain to be answered.  But the likelihood is that at least some Groupon customers will, providing you with a cost-effective way to acquire new customers. Once they've purchased from your store, you can  then re-market to these new customers via much less expensive channels such as your own email list, Facebook page, Twitter, etc.

So start a Green Groupon?  No.  Go green on Groupon?  Yes!