Feb 272012
 

By most measures, Valerie is much more active when it comes to finding a “deal” than I am, though we seem to sometimes fit the stereotype that women like deals on things they don’t need, with men paying any price for things they think they do (whether that’s actually the case). I’m not above taking a good deal – hence that bulk purchase of way more used photo equipment than any non-professional needs – but I don’t buy things just because they are cheap. So unsurprisingly, she’s used group buying services like Groupon, Living Social, and Google Offers a decent number of times; by contrast, I just finally used my first Groupon.

Note that I didn’t say that I just bought my first Groupon. That actually happened back in 2010 sometime, when Greg in the office said there was a deal on printing a photo book from Photobook Canada. For some reason, I bought four coupons – I don’t even remember for how much – each of which provided $115 of credit to be applied to a future order. It took a surprising amount of time to actually do this – even though I created just one book for photos from 2008, one for 2009, and made two copies of each. But I really didn’t have a choice, as I’d gotten a half-dozen nag E-mails reminding me that my Groupons were going to expire at the end of February (which I’m sure is part of the overall business model). I had inquired about cancelling for a refund – especially since I now live in the U.S., and Photobook Canada doesn’t even ship to the U.S. – but no dice on that. Fortunately, they do offer local pickup, so we’re going to ask our family back in Toronto to get the books once they’re ready.

I have two sets of comments; one on Groupon as a model, the other on Photobook Canada specifically (prior to having seen the books they produce, which will greatly affect my impression of them in one direction or another). First, on Groupon – and as always, these are just my personal thoughts:

  • Groupon seems to be viable only for merchandise that is ridiculously overpriced to begin with.  Groupon expects a couple of things from businesses that offer deals.  First, you’re supposed to offer an “incredibly” good deal – 50% off the “normal” price of your merchandise is typically what you see promoted.  Second, Groupon takes some percentage of the deal you sold, and this percentage is also typically around 50%.  So the merchant has to think that it’s a good idea to essentially sell their stuff for 75% off, at least to get you in the door.
  • This simply can’t happen for most fairly priced goods, unless a business is remarkably good at gouging it’s regular customers. Indeed, in the case of the Groupon I purchased, the real situation wasn’t as extreme as the deal would leave you to believe – because you were getting “$115 worth of Photobooks” based on prices that nobody actually ever pays. I’m not kidding about the latter; hit up the site, and you’ll see that non-Groupon purchases automatically get 30% off plus free shipping this entire month. Get their newsletter, and you could have picked up this deal a couple of weeks ago and gotten a $115 book for $50 (60% off!). In defense of Photobook Canada, that whole industry seems to operate on a model of inflated retail pricing that nobody ever pays, but in this respect, that’s exactly what Groupons seem to be designed for.
  • By contrast, consider a place I like to shop – Costco. Nothing there is priced to rip you off if you aren’t price saavy, there’s rarely discounts/sales unless they really just need to get something off the floor, and their attitude towards the customer is exceptional. I bought a Blu-ray disc once and realized later that I must have dropped it somewhere. So I bought another copy, and just casually mentioned this to the cashier. They told me I should definitely check at the customer service desk, so I did. They had indeed found it, dropped in the slush in the parking lot. But they didn’t want me to take that one. No, they wanted me to keep the one in brand new condition and they just refunded the earlier order. But anyways, I don’t mention Costco to point out one anecdote on being customer focused. Take a look at their margins per their latest financials. For the last full year, they sold $88.9 billion of merchandise – which cost them $77.7 billion to buy – a markup of just 14%. And that’s just gross cost of goods – it doesn’t count the $8.7 billion expense of doing things like paying their happy employees; their net profit margin is just 2.4%.
  • One of Groupon’s taglines is “collective buying power”. But if you stop and think about this, it doesn’t make much sense. Unless a manufacturer selling in bulk to a wholesaler and not dealing with any of the hassle and cost of working with individual customers, merchants selling through Groupon have to do everything they would normally have done in a 1-1 customer transaction; they save nothing from serving Groupon as a single entity. It’s purely a marketing vehicle to bring customers in the door.

I’m suspect of how long a business model for goods priced this way can last. Over the long term, I suspect that the cost of marketing your business via Groupon will have to fall in line with what it’s traditionally reasonable to spend on marketing as a portion of your total operating costs, which I don’t imagine that Groupon currently is. Groupon has certainly been smart in getting this far and growing so quickly, and I don’t fault them for finding something that works structurally in the current business climate – it just doesn’t seem sustainable to me, or like something that most businesses should participate in. But we’ll see – there’s lots of power in offering something that looks like a deal, even if that doesn’t tend to work on me!

So, Photobook Canada? I have to reserve most judgment till I receive the actual books I purchased, which will probably take a while since they’ll be in Toronto. If they’re super high quality, then any inconveniences along the way will seem pretty minor and I’d recommend them heartily. That said, the creation and purchase process wasn’t that smooth:

  • Compared to a U.S. based service I previously used and found to be quite good (Viovio), very little information is shared on their website to give you a better feel for how what you’re doing in software will translate into a look of the final book. By contrast, Viovio had all kinds of information, details on the binding process, how the actual cutting/cropping of the prints happens, etc. I really feel like I have less of an idea what the books are even supposed to look like.
  • The software that’s provided by Photobook Canada (which they license, but don’t make) is easy to use – but poor overall, in my opinion:
    • You import entire directories of photos to use. There’s no nice interface for picking and choosing which you wish to use. As I was picking from many thousands of candidate photos, this just wasn’t workable – I had to make temporary directories outside of their software, then import those directories.
    • Basic things like photo orientation (of JPGs produced by Nikon cameras, since I wasn’t shooting RAW in 2008/2009, sadly) were missing. I had to manually rotate every portrait photo!
    • Zooming, cropping, and aspect ratio manipulation were a huge pain, and highly counter-intuitive.
    • You’ll probably have multiple photos on a page. Want to keep them aligned? There’s a grid, which you can snap photos to. But stupidly, only the top left corner snaps to the grid. When you size the photo, it doesn’t snap to anything. So they only want to do a layout where photos share common dimensions is to actually edit the dimension of the photo.  Then, you get to go through the zoom/crop process again, since adjusting this messes that up.
    • The software crashed several times. Fortunately, the impact of this was minimal, as it implements auto-save that worked decently for me.
    • If your images aren’t exactly what you want already, your options are limited. The software has brightness/contrast controls, but increasing brightness uses some odd approach that trashes contrast. Effectively, if you want good results, you’ll have to have edited every photo you use before bringing it in. This is inconvenient, because your main edit for a photo may differ from what you want when presenting four photos side-by-side; in the latter case, you don’t want huge variations in brightness, saturation, etc.
  • The ordering process is a somewhat confusing back & forth integration between their offline software tool, and their website. Creating two orders from the same project with different options (paper type, etc) requires you to duplicate the project (otherwise it says you already ordered the project).

Let’s hope the output quality is much higher than that of the tools provided to create the books! And here’s to hoping that Adobe Lightroom adds a module to do this across printing providers in the future!

 Posted by at 10:52 am

  6 Responses to “Groupon and Photobook Canada”

  1. It was kind of funny to see this post, today. My wife and I were desperately trying to finish two books before our Groupons expired (today). I finally went to place the order, and nothing worked. Quite stressful, but I guess they were having issues. On the front page of the website is a small news item that says all Groupons expiring on the 28th are extended to March 21. I guess I’ll try and print them again on the 20th.

  2. I recently finished my fourth Photobook Canada book and it definitely takes a long time to put one together. I’ve become used to all the hassles you mentioned, but I’ve also used myPublisher and Shutterfly and my experience was usually worse with them. I’ve also noticed that Photobook Canada’s Groupons used to last a lot longer before expiring, but that’s completely changed. Some companies let you use Photoshop or InDesign templates (like Pikto in the Distillery District), but my guess is that this would lengthen the book design time while giving you more control.

  3. […] talked a little about Groupon, and why I think the model in general is ultimately challenged, in an earlier post after using up my Photobook Canada Groupons. I haven’t gotten to see the photobooks yet, so […]

  4. “One of Groupon’s taglines is “collective buying power”. But if you stop and think about this, it doesn’t make much sense. Unless a manufacturer selling in bulk to a wholesaler and not dealing with any of the hassle and cost of working with individual customers, merchants selling through Groupon have to do everything they would normally have done in a 1-1 customer transaction; they save nothing from serving Groupon as a single entity. It’s purely a marketing vehicle to bring customers in the door.”

    I did stop and think about it. I do not agree with this and more than half of your post.

    In terms of production, the more units you produce, the cheaper it gets. It’s all about economics of scale. I own a small customisable t-shirt printing business and the overhead remains the same if I produce 500-2000 units. It actually makes sense to fill in the rest of the 1500 units to average and reduce the overheads.

    Besides that, I usually cover my overheads and material costs after selling about 500 pieces which will reduce the cost of producing the next 1500 units. Ever heard of a break even point?

    Thanks to your post, it actually makes sense for me to work with Groupon as I can sell the remaining 1500 shirts for a lower pure profit margin but it gets the production going compared to not selling them at all. (its like Costco providing cheaper products due to their economics of scale.)

    In my opinion, your post is relatively bias from a layman’s point of view. Think about the bigger picture and it will all make sense.

    Oh and how could you compare these small companies with Costco? They are running a billion dollar empire. It’s like comparing the size of a mouse to an elephant. Plus they are providing homogeneous products compared to these printing shops where their products are unique.

    The players in the printing/gift industry are targeting the niche market. Costco has the capacity, capability and core competencies to overthrow their competitors in comparison to other smaller businesses. If I were to sell my shirt at a 14% profit margin, I will not be able to pay my employees or feed my family.

    That’s the reason of starting a personalised shop in the first place. You’re selling unique products. That’s what people are willing to pay more compared to a $10 shirt off the shelf. I swear the printing cost of one shirt in a factory that is mass producing them is less than $1 (in my country that is).

    This post is not meant to defame or insult anyone. It is just my point of view as a business owner.
    Thanks for your time.

    • Hey Zoro, thanks for your thoughts. Re-reading my post, it’s probably a bit inflammatory – moreso than intended – towards merchants who have legitimately participated in Groupons. And indeed, it is over-simplifying to say that there are *no* businesses where Groupon-type models can generate legitimate economies of scale; the T-shirt example you mention is a good one. Others, like a cruise on a ship that’s normally half-full, may fall into this category as well. So I definitely over-generalized in my original post!

      But for many examples – a meal at a restaurant, a haircut, home cleaning services, botox treatment (all of these from the last Groupon E-mail I received) – the marginal costs of additional customers just don’t seem low enough to justify Groupon’s massive cut and the revenue loss to the merchant, unless as I mentioned to begin with, the original goods carried an extremely high margin and were meant to be sold as a discount.

      In any case, I don’t mean any disrespect to you or other businesses who participated in this model, and I’m sure there are stories of legitimate success for business owners who did their math carefully and put together the right offer. I still don’t think it’s a viable long-term model, and with Groupon’s stock down from it’s $26 opening to $6.60 today, investors seem to be souring on long term prospects too – but time will tell! Thanks for your thoughts!

      • Hello Mark, thank you for replying my comment. I was just searching on google and stumbled upon your post and thought that it was a little bias. I must admit that I’m quite defensive by nature when it comes to topics like this. 🙂

        I agree with your points about the other businesses. However, we should also take in to account that most of them are service based and a large portion of the price paid is actually for the service (labour cost) provided instead of the cost price of the products.

        Exhibit A, botox treatment. The price of botox is negligible compared to what they charge. I assume (I’ve never did botox before or any research on it) that the doctors are well trained and not everyone can inject botox professionally. Therefore, the doctors price their sessions based on how much their service costs. Same goes to the hair dressers. If the customers are satisfied with the service, they will come back for more; in an idealistic world.

        Next, the food industry. I’ve actually bought a couple of Groupon vouchers for some restaurant near my house. The first one was perfect. It was a 4 course meal and the portion is generous. However, for the second one, it was in a different place and their portion has been reduced like how they slash the prices off for the deal.

        I guess it boils down to the business owner/shareholders and how they plan to optimise the use of Groupon. People always tend to forget about the human element behind a business. Food for thought. =)

        Anyhow, it is fun discussing matters with you. I hope I didn’t offend you in anyway. These are just my opinion of how things works with the group buying companies.

        Thanks for your time and thoughts too!

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