Lefkofsky has left the building!°
Groupon shares rallied in after-hours trading last night, jumping at least 10 per cent - after the daily deals site announced a better-than-expected rise in revenue. The voucher bazaar is still making a loss, however. Investors have been more optimistic about the site's stocks since co-founder and chief Andrew Mason was …
Lefkofsky has left the building!°
They keep 50% of every voucher value - all the losses are borne by the poor sap businesses they pretend will gain new, loyal customers. It's a parasitic model, it is tough to see how they manage to lose more money than they make.
hardware and infrastructure costs....connectivity and bandwidth costs...website/software development and maintenance costs...systems administration costs...administration costs...fees to credit card companies...fees to specialist testers to ensure security and integrity...etc....etc...etc...
"It's a parasitic model, it is tough to see how they manage to lose more money than they make."
Because the supply of businesses willing to sign up under those terms is likely to dwindle- those who get their fingers burned once are unlikely to use it again, those who aren't smart enough to learn (or are in a blinkered race to the bottom) will probably go out of business, and those who haven't tried yet will be aware of the pitfalls associated with Groupon deals by now.
Of course, there may be some cases where the business still gains more from the relationship than Groupon extract (i.e. how it *should* work). But that's likely to be a *far* lower percentage than Groupon would like us to believe.
(It's theoretically possible that a business could be wasting money on endless Groupons and still keep their head above water by doing well elsewhere; the ideal situation for a parasite. But any business competent enough to be the latter is less likely to do the former.)
Sales people like their commissions
I expect they make a loss because the company hyper inflated while at the same time conducting scorched earth policy that left every market they passed through a barren wasteland of "service industry" offers - car waxing, eyebrow plucking etc. All the businesses which actually sold a product either went out of business or got so badly burned as to never use Groupon again. It's only service industries which can survive in the world of coupons because they can invent some preposterous figure for their service and "discount" it and still make money because there are little material overheads.
So they have the massive infrastructure and sales teams and not enough business to sustain it. On top of that their business is hardly unique. There are probably 4 or 5 rival services in most of the markets they compete in, and perhaps some of these are more nimble, have lower overheads and are better to deal with as far as businesses are concerned.
The eyebrow pluckers need to be paid at least minimum wage, and the rent and council tax needs to be paid on their premises. That sets a minimum price at which eyebrow plucking becomes viable as a business proposition. If Groupon vouchers cost the same or only slightly less than it costs to walk into a rival eyebrow plucking establishment, then people will just walk in and pay cash rather than go through the hassle of buying Groupon vouchers.
"The eyebrow pluckers need to be paid at least minimum wage, and the rent and council tax needs to be paid on their premises. "
Well quite and that's still less that a similar sized premise which cooks food or sells a physical product which is a cost to the bottom line that cannot be discounted away. That's the point. The eyebrow pluckers can pull some figure out of their backsides, e.g. £60 for their service, halve it to £30, give Groupon / whoever £10-15 and still make money.
As for rivals, I expect you could negotiate a better deal but how many people would bother? Perhaps they end up driven out of business or add to the noise of service industry dross on Groupon by joining themselves. Probably why it turns into a sea of shit after a while and why Groupon is lacks the good will to sustain anything more attractive.
Yeah, vouchers are such a new-fangled idea. Old ladies haven't been clipping them from newpapers since before you were born, proving that vouchers are a workable form of marketing.
and we're waiting for the "dump"?
Groupon is completely, totally and hopelessly doomed. Sadly, through shenanigans like a tiny float, GRPN has made it impossible to short the thing. Even though you can predict what will happen, there does not seem to be a way to profit even from its doom.
The deal has to be generally a "stupid" deal and you only get the funds on redeemed vouchers (around a third of vouchers are not redeemed if a gift and around 10% if not bought as gift), it's this that makes the model work for the client business - the non-redeemers subsidise the redeemers.
Many other voucher firms pass on the total income less commission (which includes future non-redeemer income.)
Simply other players are in the market and offer better deals for client businesses (including lower commision rates) and a better overall client relationship which means you reuse the competitor over this particular voucher organisation.
From: "Groupon" <email@example.com>?= Encoding: -Detect automatically-ArabicBalticChinese (simplified)Chinese (traditional)CyrillicGreekHebrewJapaneseKoreanRussianThaiTurkishUkrainianEnglishEuropean (Central)European (West)European (South)European (North)worldwide (utf-8)Date: 2013-05-10 09:18
$99 MyNight Fashion Sports Bra Set (Valued at $280)
While holding chests up with hands is one way to support cleavage during volleyball matches, it leaves gals with nothing but their faces to spike the ball. Save face with today’s Groupon. Today’s Groupon: A MyNight fashion sport bra set ... more ""
Whilst I occasionally buy into some of Groupon HK's offers - I must admit that I consider that their copy writers ought to be taken out and shot.
Flights of fantasy?
More like that they were high on illicit drugs which have interfered with sane descriptions of items being peddled.
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