Former Groupon Employee Describes High-Pressure Tactics Culture And Merchants "Freaking Out"

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Editor’s note:Guest author Rocky Agrawal continues his in-depth TechCrunch series looking at the daily deal industry. Agrawal is an entrepreneur who has worked on local products since 1995. He blogs at reDesign and Tweets @rakeshlobster.

I received a couple of emails from a former Groupon employee which sheds some light on the sales culture at the company.  This is one person’s view, but it comes from a former insider.  The emails are below, and are fairly balanced and honest. You can judge them for yourself.

This information was provided on condition of anonymity. The employee left voluntarily for a position elsewhere.  “I really don’t have any reason to fabricate anything, i just think its time mom and pop shops know what they’re getting into before getting swept up in the hype, and your series has been great,” the former employee said.

Some of the key points:

  • Some sales representatives care about merchants, others view them as a nuisance.
  • Some reps only care about commissions and don’t cap the number of deals that can sold. Groupon then has to do this in real time when merchants freak out.
  • Sales people (not surprisingly) are encouraged to squeeze as much as they can from a business.
  • Last minute changes to deals are common.
  • The ex-employee encourages small businesses to really run the numbers themselves.

From the first email, emphasis added:

Groupon sales people are like most sales departments—there are good apples and bad apples, people that really care about the merchants they work with and people that only care about their commission, no matter the cost to the people in the way.

One very common phrase is in regards to the merchant “freaking out,” and this happens every single day. What this is almost always in reference to is a merchant who can’t handle the traffic that they end up getting, forcing a live cap of a deal (almost always because it benefits the sales people not to cap it, obviously, and they advise merchants to sell more Groupons than the business is able to handle, mostly by low-balling the estimate of how many will sell). There are also constantly issues with the terms changing, because, as you said, the merchants are sold on the “Who’s Who” pitch, and they agree to terms they should never have agreed to.

In many, many cases, the merchants are spoken of by the sales people as silly, irksome, unstable clients that are just part of the job. Sure, some of them are. But what this really points to is that owners care about their businesses, and sales people care about their bottom line. 

I’m not saying Groupon is filled with evil capitalists; it’s not. There are many fantastic people that work there with great talents and great integrity. But, the sales people are encouraged to squeeze as much as they can from the businesses, and it very, very often results in disaster for the businesses themselves. By very often, I mean every single day, there are many businesses that must put on emergency deal caps, change the terms due to volume they can’t handle, etc. My only thought as to why more of these businesses haven’t come forward is that they do not want to get blackballed from running again should they so choose. The waiting list to actually run is gigantic, and it often takes months before a business can actually get a deal to run.

I have often wondered how long it would take before businesses started coming forward about this, and I think your recent articles will encourage that. After all, as heart-wrenching as it sometimes was to see what was happening to small businesses that ran Groupons, it is the job of every business owner to make the best decision for his or her business. Sometimes (increasingly so with all the daily deal options), that means realizing that when something seems to good to be true… well, we all know the rest.

There is also something to be said for the very small amount of mention of the “haves and have nots” within the company itself. As the staff grows, this is a growing problem. I will say that the situation inside the company, in my experience, seemed like a powderkeg in this regard. There were/are a lot of bitter attitudes about the way things are handled internally, because, predictably and understandably, the company is being run by people who have never run anything before, let alone what are now gigantic departments, and this results in a whole lot of frustration and feelings that the work that’s being put in (which is an insane amount of work, as anyone who’s worked for a startup will attest) does not equal the pay being given out. I will say though, this makes more sense seeing the gigantic losses that were previously unknown, even to those within the company.

I really do want more businesses to avoid the potential disaster of running a Groupon. It was a bit tragic watching so many businesses get hosed so enthusiastically.

From a second email, where I asked specifically about fraud.

I’d also like to add that Groupon/daily deal sites really can work for businesses, but they have to be willing to go to bat for themselves and really run the numbers before they decide on terms. If what will actually work financially for them won’t be accepted by Groupon, then they shouldn’t run. Period. Way too many businesses cave on this when they shouldn’t budge whatsoever on what makes financial sense for them.

Honestly, I never dealt with any issues of fraud personally. I will say that some very questionably businesses made it close to going live, to an alarming extent. A lot of sales people seemingly would run any business that was willing, and the vetting was suspect (if it happened at all), as other employees would find unbelievably bad businesses in the pipeline. For the most part, these kind of places got caught before going live, but… buyer beware. In light of this, fraud/closing soon after running is entirely possible, though Groupon does go to great lengths after sales people sign up businesses to make sure that they’re legit and worth running. The fact-checking department is possibly the strongest and most integral department there, and anything that gets through them is simply because the amount of deals coming through the pipeline everyday outweighs the man power. Seriously, the pace is insane over there. This also leads to another point: The customer service department at Groupon is awesome, that is no lie or marketing ploy. They deal with tons and tons of headaches each and every day on all sides of the deals, and they honestly do their very best to make sure everyone is happy. I do not envy them.

To share your daily deals experience, please email dailydeals@agrawals.org.