Daily deal sites such as Groupon are just a fad with little individual staying power, a new study has claimed. According to the Rice University, Groupon and other coupon promotion websites lack a key ingredient for sustainability because businesses don't remain loyal to one site. "Our findings also uncovered a number of red …
...it doesn't help that Groupon demand you give away at least 60% discount and then take 50% of the money. AND hold on to all the money in the event that the customer does not use their coupon even though it's the retailer taking the hit.
Standard industry practice
I used to run a 4x4 driver training school, we had a few voucher companies selling vouchers for our services. We got about 50% of the face value of the voucher, and they paid 30-60 days after the courses had been given (if you were lucky - twice I had companies fold owing me for a large number of courses).
I gave it up in the end, just wasn't profitable, especially not when compared to fettling computer systems for fun and profit.
it all depends on scale, if you are big enough to be able to offer discounts in a large amount of geographic areas to a large amount of customers groupon will change what they want and will also share the non redemption money
Groupon expects a business to provide a service or products at 25% or less of their usual revenue to an unspecified number of partakers. In the case of restaurants / shops this invariably means they lose money because couponcutters are cheap (by definition) and will redeem their voucher without buying much else. In many cases the participants were even regular customers who would have paid full whack in the absence of a coupon so the losses are higher.
I bet there are some really pissed off business owners telling all their neighbouring businesses how shit the service is. Couple that with all the competition that is springing up and groupon is doomed. They've poisoned their own well turning a viable business into a surefire flop.
I can't say I'll feel sorry for them when they do, or investors who foolishly invest without researching the sentiment that surrounds the company or the dodgy dealings of its CEO. The sad part is when they do go titsup you can guarantee there will be tens of thousands of customers holding worthless groupons and thousands of businesses still owed payment. They're the ones who'll suffer and the smart ones will steer clear of it altogether.
The consumer side
I registered on Groupon maybe 6 months ago. It's like seems like a constant stream of pedicures, manicures, beauty treatments and hairdressing. Maybe I didn't tick the box saying I was a bloke? Maybe it didn't exist? Anyway, never once have they sent me an offer that I'm remotely interested in. Just my tuppence worth.
A new twist
Many of the coupon companies in the UK are trying to tie business into a 2 year exclusive contract preventing them using other coupon sites.
Add to that the extortionate cost and the fact that in most major cities the cheapskates descend like locusts, pillage your business and then piss of to the next mug its little wonder people dont go back.
To be fair groupon has had some decent deals in the past, I've bought about a dozen since it's been up and running, mainly at restaurants/hotels and the odd hairdressers for the missus. There are too many toe eating fish and their type of deals on though. No way is it worth $6bn, I think Google will be breathing a huge sigh of relief once they realise that they dodged a bullet here.
Groupon is a joke.
There is 0 long term sustainability here.
Answer this question.
What does Groupon brings the following that is not easily duplicated by potential rivals for less?
The answer is, nothing.
As soon as either google or craigslist decides to compete using an automated systems and a
very small margin Groupon is dead.
What Groupon is now is a boiler room operation convincing stupid businesses that selling
something for 25% of what they charge now is a good idea, even though it will likely make
current customers either unhappy (or use the "deal"). So, unless a huge volume results
with a repeating customer base, the business is screwed.
Businesses realise (and tell others) that it's just not profitable - even if they do the first sale as a loss leader they are finding only a small proportion of customers are actually coming back.
Customers get fed up of the 50th fish pedicure offer or offers miles away.
Not just b*****t but radioactive b*****t
In ever heard of groupon until I saw an article in the Guardian. Working on the maxim "Wrong about everything, every time" I signed up to see what they had on offer.
Nothing for my city, a national deal for the crappest smartphone on the planet, some stuff in Cambridge that the fuel cost renders uneconomic...coupled with the hagiography of the CEO, this one has TimeWarner/AOL written all over it.
Lies, damn lies and statistics
"Of the 324 businesses surveyed, more than a quarter reported they had lost money after using daily deal sites. Another 17.9 per cent of respondents said they broke even."
So, more than half made a profit from it then.
As far as I can see, the whole point of Groupon et al is that they are a loss leader to get repeat business (or your business' margins are so huge int eh first place that you still make a profit). Just like any other form of advertising, if done wrong it's a waste of money.
The only place I see their ads is Facebook.
Groupon depends on businesses operating under their ideal capacity, businesses hoping to break even and introduce new customers to their services. In itself that seems simple enough, but we have not only entered, but further and further plunge into a socially aware era where businesses that aren't popular are that way because people have communicated that the business isn't as good as business XYZ down the street.
Thus, people will suffer the inferior service when it is at sufficient discount, but if paying regular price they will continue to frequent where they went before the groupon offer came along. The business spends the time and resources without a return which is essentially operating in charity mode.
These types of websites will pop up like weeds and none will gain the foothold they need. Worth several billion? Ridiculous, throw together a group of marketers and anyone can start such a site which will have popularity coinciding with the value of the deal offered.
Deal shoppers realize this, you can't just go to the same place and do the same thing and get the best discount, it's a moving target because once something becomes popular, supply and demand assures that the discount value diminishes.