Wednesday, July 13, 2011

Diapers Direct and the Perils of Groupon

“We sincerely apologize about the delay on your product delivery.” These are not the words that you want to see when you open your email, particularly with something as essential as diapers. At the beginning of June, we purchased a $25 Groupon for $50 worth of product from We promptly placed our order (as many others did as well), and received our diapers in mid-June. Apparently, we were one of the lucky ones, as we discovered that this was the fourth email that Groupon customers had received regarding unfulfilled orders. So, we did a little digging and this is what we found:
• A quick Google search indicates that Diapers Direct offered a Groupon in Amarillo on May 11 which was purchased by 1,396 Groupon-ers. Over the course of the next 3 ½ weeks, this deal was featured in at least five other cities and purchased by over 900 additional customers. As we read the email mentioned above further, Diapers Direct goes on to state, “An estimated 98% of Groupon customers at our website have used their coupon within one day of purchasing it. The steady stream of customers over a six month period that we had planned for became a tidal wave of orders all made in the past thirty days.” Recent data from Groupon is consistent, with only 10% redeeming their coupon within one month, but if nearly 1,400 orders were placed on day one, this leaves us scratching our heads as to why Diapers Direct didn’t pull the deal after the first tidal wave of orders.
• Diapers Direct is a small business (with only 3 employees, according to their email) that presumably used Groupon in order to get a couple hundred new customers. “We have had commercial customers that purchased as many as 110 Groupon coupons.” Unfortunately, they didn’t set a limit on how many people could purchase their coupon and they instantly became overwhelmed.
• In a recent study on daily deal sites conducted by Rice University, nearly 80% of coupon users are first-timers, and only 20% of them become repeat customers. This conversion rate does not bode well for Diapers Direct (particularly since so many customers still have open orders). “We are by nature a recurring order company. A company designed to make monthly deliveries to a regular repeat customer base.” We’re betting the commercial customers mentioned above were not planning to become repeat customers. What’s more, any pre-existing customers are likely having a difficult time placing non-Groupon orders, damaging their existing customer base.
So what are the lessons learned?
• Know how Groupon works. Understand everything from what percentage Groupon will take of your profit, how many coupons the deal is limited to and how many coupons are available to purchase for each customer.
• Ensure your business can cover the discount you will offer. Diapers Direct planned to “lose a little money on every transaction and expected to do so as this was our way of introducing ourselves to all of you.” They likely did not plan for as many transactions as they got.
• Plan for best and worst case scenarios. Can you accommodate 1,000 new customers? Have you ordered additional stock for the initial wave of orders and the final month of your deal as customers try to use their soon-to-expire Groupons? Do you have enough staff to accommodate the influx of orders? Even if Diapers Direct had all product in stock, three employees could not efficiently and effectively fill all orders in a timely manner.
Groupon is bigger and more powerful than most of us understand. It’s either a quick way to double your sales or to go out of business.
There’s no question that Groupon, Living Social and the myriad of competitors are nothing short of a global phenomenon in retailing, service and foodservice businesses over the past two years or so. It is equally clear that there is much that’s unknown about these offers, particularly as it relates to both short and long-term success. We know the old saying Caveat Emptor (buyer beware!). In this instance, Caveat Venditor (seller beware!).

This is a guest blog from Felicia Greenbaum, McMillanDoolittle Business Manager


  1. has been down for (at least) 3 days now, 11/5/2011.

  2. I purchased one of these groupons back in July and could not send out my order for 2 months. I was very angry and since I did not purchase my Groupon from the site, but a site that resells groupons, I could not get a refund. Well I logged on today to reorder and site is down. NOTHING but bad business practice from this company!!

  3. I used my Groupon back on September 6th. Today is Nov 17th and I still haven't received my order.

  4. I made a purchase using my groupon plus I had to pay out of my pocket. I got my refund from groupon but I have not received the refund from Direct Diapers for the out of pocket I paid. If I do not get my refund, I think legal action will be taken.

  5. It appears as though is still down; sadly, I suspect there are many more than just those who posted here who will not be receiving their orders.

  6. It was a pain just to get a refund for that Groupon. If your order was above $50 and you paid the difference to DiapersDirect, then you had to request 2 separate refunds, one from Groupon and one from DiapersDirect.

    I wrote an email to Groupon customer service about the hassle, and they compensated me with a $10 credit for future Groupon purchases. For anyone that feels they've been inconvenienced, I encourage you to write to Groupon and ask for compensation for partnering with a vendor that's not equipped to fulfill orders.

  7. I have found that offers the best prices consistently for diapers, especially if you combine the Amazon Mom discount with the Subscribe-and-Save discount. Free shipping right to your front door. And, a lot less hassle than trying to stack coupons or dealing with Groupon merchants.

    Also, for a limited time, is offering 5% cash back on all orders, so you can save even more on diapers and other baby products. Details are available on their website or at

  8. Unfortunately unless you are a business owner/manager/employee etc who has used Groupon for your own business or one you work in, it's hard to know all sides of the story. You may read their policies but I can tell you from personal experience what they do, but first know I ordered a Diapers Direct Groupon so this isn't without both sides of experience. I own a salon and we signed up with Groupon and we were told that they were going to cap our sales on our "Groupon" at 200, they sold 519 and that was after I called them and told them to stop. They agreed to put :new clients only, and one certificate can be used per person. They did neither of those, and they expected a small salon with 4 hairdressers to do 519 clients within 6 months during Valentin's Day/prom/graduation/Easter etc. one of our busiest times of the year. We would have had no problem doing 200 in 6 months, but not 500+ and maintaining our same level of service with our established clientele. I'm sure it wasn't DiapersDirect intention to not be able to fulfill orders and to receive bad reviews for the inconvenience this obviously caused it's customers. And if we want to be logical about the situation, would you conscientiously want to put a business out of business just to redeem your $25 of free products?

  9. When groupon launches a deal it should make sure that the deal is fully gained by the customers.Groupon should should regularly about the updates of the merchants or else they should cut off the process with the merchants.All the deals should be monitored closely before its online.
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