4 ms·

The problem is that Groupon's customers aren't actually the people buying coupons, it's the businesses selling coupons, and we've heard plenty of horror stories

by Qz 16y ago

The problem is that Groupon's customers aren't actually the people buying coupons, it's the businesses selling coupons, and we've heard plenty of horror stories from that side of the coin. Whether that aspect is enough to dig Groupon's grave is an open question, but let's at least make sure we're approaching the question from the appropriate angle.

pclark 16y ago
If that is right - and it's totally possible - isn't this a fundamental flaw with the business model for all competitors too?
replicatorblog 16y ago
Have there been that many stories? I've heard a couple from small time coffee shops that may not be the best financial planners, but those few sad stories seem to reverberate without a lot of new voices joining the chorus.
- awakeasleep 16y ago
  I'm going out on a limb here, but has anyone else noticed that HN has a tendency to hate on Groupon? We see dozens of articles like this reach the front page predicting Groupon's doom, always citing the same dissatisfied coffee shop, always attacking imaginary business models. I'd like to see someone refute Groupon's value as an advertising tool, or even compare it to existing alternatives. On top of that, a class of hacker news user exists who spells "Groupon" groupOn. It seemed liken impossibly childish insult, to mangle something's name, so I assumed it was an accident or maybe that's how Groupon used to be spelled when it was a startup. Well I looked it up, and no.
  - Tichy 16y ago
    Personally, I tend to hate it because I am convinced that coupons are evil. It is just a way to control people's behaviours and turn them into consumer sheep, which I resent from the bottom of my heart. I root for startups that empower people and open up new opportunities, not for ones that have found a loophole in the human psyche and exploit it to the maximum.
    - justincormack 16y ago
      Outside the US coupons are not a big business, at least in the countries I know. So I wonder if it will translate as profitably in the rest of the world.
      - alextp 16y ago
        Here in brazil (at least in são paulo) there are around four companies (groupon included) fighting tooth and nail for this market, even using black-hat-ish techniques (unsolicited email, misguiding website, impossible-to-unsubscribe mailing lists, deceitful ads, etc). I think most urban-ish places with a capitalized youth are a ripe market for coupon-type businesses.
    - SkyMarshal 16y ago
      I wouldn't say they're exploiting a loophole in the human psyche, rather a very well known aspect of it. It's also a brilliant business model for a recession and financial crisis. In most instances it's win-win-win: - Groupon makes money - people get huge discounts, and save money if it was something they were planing to buy anyway. - businesses both make money (assuming they worked out the math of the deal correctly before accepting it) and gain huge exposure. I suppose the only losers are wherever people would have spent that money had they not bought the groupon, but that's hard to quantify (bought the same thing at a higher price? bought something else? saved it?). I can't think of many more innovative business models for a distressed economy.
      - symptic 16y ago
        The losers are the waiters and employees of the featured businesses. I know plenty of people in the service industry who dread the days their restaurants or shops offer discounts on Groupon. Sure it makes money for the company, but in many cases a Groupon deal kills morale within the business. That on top of the exploitative nature of many (most?) Groupon users, where they buy a Groupon and never revisit the business after they use their discount. Groupon is a great business, but some concerns about the quality of the leads arise. We need the Glengarry leads.
  - steveplace 16y ago
    HN has a tendency to hate on a lot of things that are wildly successful.
    - evbart 16y ago
      I think the accusation is that it is somehow a "low brow" startup. See NY Mag's approval matrix: http://nymag.com/arts/all/approvalmatrix/71237/ http://nymag.com/arts/all/approvalmatrix/71237/ All I can say is wow, they scaled super fast (scaled real people), and thats not easy
  - Travis 16y ago
    My personal theory? There's a lot of jealousy in HN users WRT groupon because they didn't start it. It's not an unbelievably complex idea -- I'd wager that many Groupon-hating HN users probably think that their current startup is much more complex/important/awesome. They're bothered by something so simple making so much money. At least that's how I initially felt about Groupon. At the same time, my attitude seriously limited my business. I'm trying to build a b2b marketplace, and wanted to build my "marketplace of dreams" (if I built it, they will come). I didn't address SEO or getting initial traffic because that was low brow, and would take care of itself if I built a cool enough product. Boy was I wrong. That was a long (2+ year) lesson to learn.
- jdp23 16y ago
  In last fall's First Look Forum in Seattle, two of the five finalists (including the eventual winner Grocery Cart Savings) had good data on the problems merchants have with Groupon. Of course Groupon's aware of those too and may well have improved things since then, but the discontent is very real.
pchristensen 16y ago
The only horror stories I can remember are that Mimi's coffee in Portland (?) and the Japanese new year. I've heard other second- and third-hand reports with no names or specifics. The "merchant horror stories" don't pass the sniff test for me - it seems like the same one or two brought up over and over again. It just seems like a fake news trend. Andrew Mason said at startup school that the merchant satisfaction numbers are something like 95%. I
- nickgeiger 16y ago
  For what it's worth, I talked to a yoga studio owner who had a horrible experience (with Living Social, not Groupon). It turns out that people looking for a cheap deal on yoga classes aren't good long-term customers so the loss never paid off. I agree that we've only heard horror stories, but I'd be curious if there are small business success stories or is the service only good for big companies who can take the loss?
  - pchristensen 16y ago
    Despite being super-hot right now, deal sites are still just a customer acquisition tool. Best Buy could flood their stores tomorrow by advertising 90% off plasma TVs. Small businesses don't have the same level of experience and sophistication around customer lifetime value, so they're more likely to make mistakes like that. One of the services that Groupon provides (no idea about LS or other deal sites) is deal shaping/sizing, to help merchants offer deals that will not be super-costly or overwhelming to the merchant while still be appealing to customers. The Japanese new year incident (http://news.ycombinator.com/item?id=2111609 http://news.ycombinator.com/item?id=2111609) describes this in more detail. I think even the anecdotes will become more and more infrequent as merchants and deal sites get better at this.

by Qz 16y ago

pclark 16y ago

If that is right - and it's totally possible - isn't this a fundamental flaw with the business model for all competitors too?

replicatorblog 16y ago

Have there been that many stories? I've heard a couple from small time coffee shops that may not be the best financial planners, but those few sad stories seem to reverberate without a lot of new voices joining the chorus.

awakeasleep 16y ago
I'm going out on a limb here, but has anyone else noticed that HN has a tendency to hate on Groupon? We see dozens of articles like this reach the front page predicting Groupon's doom, always citing the same dissatisfied coffee shop, always attacking imaginary business models. I'd like to see someone refute Groupon's value as an advertising tool, or even compare it to existing alternatives. On top of that, a class of hacker news user exists who spells "Groupon" groupOn. It seemed liken impossibly childish insult, to mangle something's name, so I assumed it was an accident or maybe that's how Groupon used to be spelled when it was a startup. Well I looked it up, and no.
- Tichy 16y ago
  Personally, I tend to hate it because I am convinced that coupons are evil. It is just a way to control people's behaviours and turn them into consumer sheep, which I resent from the bottom of my heart. I root for startups that empower people and open up new opportunities, not for ones that have found a loophole in the human psyche and exploit it to the maximum.
  - justincormack 16y ago
    Outside the US coupons are not a big business, at least in the countries I know. So I wonder if it will translate as profitably in the rest of the world.
    - alextp 16y ago
      Here in brazil (at least in são paulo) there are around four companies (groupon included) fighting tooth and nail for this market, even using black-hat-ish techniques (unsolicited email, misguiding website, impossible-to-unsubscribe mailing lists, deceitful ads, etc). I think most urban-ish places with a capitalized youth are a ripe market for coupon-type businesses.
  - SkyMarshal 16y ago
    I wouldn't say they're exploiting a loophole in the human psyche, rather a very well known aspect of it. It's also a brilliant business model for a recession and financial crisis. In most instances it's win-win-win: - Groupon makes money - people get huge discounts, and save money if it was something they were planing to buy anyway. - businesses both make money (assuming they worked out the math of the deal correctly before accepting it) and gain huge exposure. I suppose the only losers are wherever people would have spent that money had they not bought the groupon, but that's hard to quantify (bought the same thing at a higher price? bought something else? saved it?). I can't think of many more innovative business models for a distressed economy.
    - symptic 16y ago
      The losers are the waiters and employees of the featured businesses. I know plenty of people in the service industry who dread the days their restaurants or shops offer discounts on Groupon. Sure it makes money for the company, but in many cases a Groupon deal kills morale within the business. That on top of the exploitative nature of many (most?) Groupon users, where they buy a Groupon and never revisit the business after they use their discount. Groupon is a great business, but some concerns about the quality of the leads arise. We need the Glengarry leads.
- steveplace 16y ago
  HN has a tendency to hate on a lot of things that are wildly successful.
  - evbart 16y ago
    I think the accusation is that it is somehow a "low brow" startup. See NY Mag's approval matrix: http://nymag.com/arts/all/approvalmatrix/71237/ http://nymag.com/arts/all/approvalmatrix/71237/ All I can say is wow, they scaled super fast (scaled real people), and thats not easy
- Travis 16y ago
  My personal theory? There's a lot of jealousy in HN users WRT groupon because they didn't start it. It's not an unbelievably complex idea -- I'd wager that many Groupon-hating HN users probably think that their current startup is much more complex/important/awesome. They're bothered by something so simple making so much money. At least that's how I initially felt about Groupon. At the same time, my attitude seriously limited my business. I'm trying to build a b2b marketplace, and wanted to build my "marketplace of dreams" (if I built it, they will come). I didn't address SEO or getting initial traffic because that was low brow, and would take care of itself if I built a cool enough product. Boy was I wrong. That was a long (2+ year) lesson to learn.
jdp23 16y ago
In last fall's First Look Forum in Seattle, two of the five finalists (including the eventual winner Grocery Cart Savings) had good data on the problems merchants have with Groupon. Of course Groupon's aware of those too and may well have improved things since then, but the discontent is very real.

pchristensen 16y ago

The only horror stories I can remember are that Mimi's coffee in Portland (?) and the Japanese new year. I've heard other second- and third-hand reports with no names or specifics. The "merchant horror stories" don't pass the sniff test for me - it seems like the same one or two brought up over and over again. It just seems like a fake news trend. Andrew Mason said at startup school that the merchant satisfaction numbers are something like 95%. I

nickgeiger 16y ago
For what it's worth, I talked to a yoga studio owner who had a horrible experience (with Living Social, not Groupon). It turns out that people looking for a cheap deal on yoga classes aren't good long-term customers so the loss never paid off. I agree that we've only heard horror stories, but I'd be curious if there are small business success stories or is the service only good for big companies who can take the loss?
- pchristensen 16y ago
  Despite being super-hot right now, deal sites are still just a customer acquisition tool. Best Buy could flood their stores tomorrow by advertising 90% off plasma TVs. Small businesses don't have the same level of experience and sophistication around customer lifetime value, so they're more likely to make mistakes like that. One of the services that Groupon provides (no idea about LS or other deal sites) is deal shaping/sizing, to help merchants offer deals that will not be super-costly or overwhelming to the merchant while still be appealing to customers. The Japanese new year incident (http://news.ycombinator.com/item?id=2111609 http://news.ycombinator.com/item?id=2111609) describes this in more detail. I think even the anecdotes will become more and more infrequent as merchants and deal sites get better at this.