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"...when you consider that better than 60 percent of Amazon's sales come from repeat customers--which implies that they're loyal..." That seems to be the key f

"...when you consider that better than 60 percent of Amazon's sales come from repeat customers--which implies that they're loyal..." That seems to be the key figure missing from the Groupon discussion. If they are buying loyal users and customers, their mad-dash growth strategy would seem rational. If their retention is poor, it would seem more like a Ponzi scheme.

ankrgyl 15y ago
Additionally, an article on HN earlier today pointed out that Amazon had to spend a lot of money investing in infrastructure, whereas the only similar thing Groupon has done is assemble a "phone book" of interested businesses and consumers.
melvinram 15y ago
I think the piece of the puzzle that most people have trouble with is not that they'll have repeat customers. It's that those customers are loyal to Groupon... or more specifically, loyal to the concept of deep discounts. The part most people, including myself, have a hard time grok'ing is that merchants will continue to punish themselves by doing business with Groupon.
- mattmanser 15y ago
  I think that perhaps you're not grokking Groupon, the customers of Groupon have never been the bargain hunters, they've always been the merchants. The bargain hunters are the product Groupon sells. You can then look at the model and realize Groupon have been screwing their own customers. It's a shame as I think the core concept of the business is pretty sound in my book, but I was astounded when I found out the Groupon were taking 50-100% of deals. Just seemed like short term gain for long term loss. I thought that at least they'd be making crazy profits, but it turns out they're making a loss! That was what truly astonished me. They don't even have any physical good, they're selling other people's products for free and they're making a loss. Jeezus, what a royal screwup. The discussion of the model here this last day has explained how/why they dug themselves into this terrible hole. If, and tbh it's still an if, groupon unravels, it'll be quite a few years before this model will surface again. Which is a shame as done in moderation it seems a sound one to me and a win for all involved.
  - melvinram 15y ago
    That's just semantics. There are three parties involved: Groupon, end customers and merchants. It was pretty clear who marciovm123 and I were referring as the customers in the posts.
    - AndyNemmity 15y ago
      It was in no way semantics, and his point was actually very insightful.
      - Goladus 15y ago
        There was some insight that was muddied by the confrontational language, and the semantic ambiguity introduced by marciovm123. There are two interesting issues: (1) repeat customers to the merchants, which they obtain via groupon. (2) merchants who use groupon and do repeat business with them. melvinram was talking about (1), mattmanser was talking about (2).
      - rmrm 15y ago
        "they're selling other people's products" -- as every reseller does. And who do they sell them to? Their customers. Customers pay you. You pay producer. That makes you a merchant. You get a really, really good price from the producer? And sell it really cheap to your customers? That makes you a discounter. I know it's 2011 and we live in the future, but it's not a new paradigm, and it hasn't reversed any relationships as we normally think of them. Discounters have existed forever.
    - space-monkey 15y ago
      "That's just semantics." Exactly. The semantics is what the words actually mean.
      - Goladus 15y ago
        "That's just semantics" is a common way of saying "you're arguing over semantics instead of the point." When arguing semantics is disguised as a genuine rebuttal, it's a fallacy. If I say the sky is blue, and you assert the sky has no color, you're not actually contradicting my assertion you're disagreeing about the meaning of the word 'sky'. That's arguing semantics instead of addressing the point.
- jamiequint 15y ago
  Exactly this. I'd be very interested in a stat of how many of Groupon's merchants are operating these deals at a profit. I know one SF merchant personally that does, but I suspect its very few. Even more importantly, I'd be interested in how many of these Groupon customers are returning to the merchant. If that number is high than Groupon has hope, if its low then they aren't actually adding much value and they can only continue fleecing small businesses for so long.
  - euroclydon 15y ago
    If you're a Groupon shopper, wouldn't the novelty, of say, going to that same spa wear off the second and third time you saw the deal? Similarly, if you keep selling your services on Groupon, don't you cheapen your brand. To me, there's not much incentive for repeat customers.
  - twakefield 15y ago
    "I'd be very interested in a stat of how many of Groupon's merchants are operating these deals at a profit." Isn't the point that it brings customers in the door albeit at a loss? Hopefully, the future value of the customer is more than the loss on the initial deal. I think that's what your getting at with your subsequent sentences. I am not in the retail business so this is just conjecture but it seems to me that it's almost impossible to operate one of these deals at a profit. Basically, you are renting Groupon's sales machine and hopefully you convert a big percentage of the customers the deal brings in. I would also guess few retailers have the ability to present value the customers future revenue correctly and I'm sure Groupon will (if they haven't already) offer tools to measure that and justify the ROI of their deals.
    - shantanubala 15y ago
      Yeah -- it's a really bad setup in the end though because Groupon attracts the type of customer that isn't likely to spend a lot of money in the first place unless there is a deal. In other words, Groupon can attract a lot of customers, but the quality of those customers isn't very good (at least from my personal experience, all of the people I know who heavily use Groupon don't really use it at places they haven't already heard of before). The ROI must be terrible, but it also can be difficult to measure.
warmfuzzykitten 15y ago
I seriously question the loyalty of new Groupon customers. Typically they sign up because of one deal. They might even buy the deal. Then Groupon proceeds to spam them every day with deals they aren't remotely interested in, at locations far from their home. Unsubscribe.
- potatolicious 15y ago
  This. The problem is that Groupon's variety of merchants is very low - I suspect because it's only worthwhile to merchants with an incredibly wide profit margin (e.g., spas or other services that have low variable costs). I unsubscribed after I kept getting deals I had zero interest in. It seems once in a while they'll get a "big deal" from a well-known merchant to get people back in - but 99% of the deals I've seen from Groupon are utterly useless.
senthilnayagam 15y ago
Groupon Economy is Recession Economy, and groupon issues food coupons to it's members, merchants accept food coupon because they believe customers don't have money and selling at discount is better than no sale. If groupon don't make profit, nor the merchants it is surely bad for the company and it's investors
DaveRobertsAhoy 15y ago
Neither consumers nor businesses are loyal to Groupon. And the moment deals start to decline in quality, consumers will hit 'Unsubscribe' or 'Report as Spam' and it's Game Over for Groupon. I've already tired of their endless emails and blocked them. I'd be interested in seeing their churn rate - acquiring new customers to replace those that leave is going to increase in cost exponentially.
bonyt 15y ago
When we talk about Groupon's "repeat customers," I wonder who exactly they consider to be THEIR customers, their merchants or their subscribers.

ankrgyl 15y ago

Additionally, an article on HN earlier today pointed out that Amazon had to spend a lot of money investing in infrastructure, whereas the only similar thing Groupon has done is assemble a "phone book" of interested businesses and consumers.

melvinram 15y ago

I think the piece of the puzzle that most people have trouble with is not that they'll have repeat customers. It's that those customers are loyal to Groupon... or more specifically, loyal to the concept of deep discounts. The part most people, including myself, have a hard time grok'ing is that merchants will continue to punish themselves by doing business with Groupon.

mattmanser 15y ago
I think that perhaps you're not grokking Groupon, the customers of Groupon have never been the bargain hunters, they've always been the merchants. The bargain hunters are the product Groupon sells. You can then look at the model and realize Groupon have been screwing their own customers. It's a shame as I think the core concept of the business is pretty sound in my book, but I was astounded when I found out the Groupon were taking 50-100% of deals. Just seemed like short term gain for long term loss. I thought that at least they'd be making crazy profits, but it turns out they're making a loss! That was what truly astonished me. They don't even have any physical good, they're selling other people's products for free and they're making a loss. Jeezus, what a royal screwup. The discussion of the model here this last day has explained how/why they dug themselves into this terrible hole. If, and tbh it's still an if, groupon unravels, it'll be quite a few years before this model will surface again. Which is a shame as done in moderation it seems a sound one to me and a win for all involved.
- melvinram 15y ago
  That's just semantics. There are three parties involved: Groupon, end customers and merchants. It was pretty clear who marciovm123 and I were referring as the customers in the posts.
  - AndyNemmity 15y ago
    It was in no way semantics, and his point was actually very insightful.
    - Goladus 15y ago
      There was some insight that was muddied by the confrontational language, and the semantic ambiguity introduced by marciovm123. There are two interesting issues: (1) repeat customers to the merchants, which they obtain via groupon. (2) merchants who use groupon and do repeat business with them. melvinram was talking about (1), mattmanser was talking about (2).
    - rmrm 15y ago
      "they're selling other people's products" -- as every reseller does. And who do they sell them to? Their customers. Customers pay you. You pay producer. That makes you a merchant. You get a really, really good price from the producer? And sell it really cheap to your customers? That makes you a discounter. I know it's 2011 and we live in the future, but it's not a new paradigm, and it hasn't reversed any relationships as we normally think of them. Discounters have existed forever.
  - space-monkey 15y ago
    "That's just semantics." Exactly. The semantics is what the words actually mean.
    - Goladus 15y ago
      "That's just semantics" is a common way of saying "you're arguing over semantics instead of the point." When arguing semantics is disguised as a genuine rebuttal, it's a fallacy. If I say the sky is blue, and you assert the sky has no color, you're not actually contradicting my assertion you're disagreeing about the meaning of the word 'sky'. That's arguing semantics instead of addressing the point.
jamiequint 15y ago
Exactly this. I'd be very interested in a stat of how many of Groupon's merchants are operating these deals at a profit. I know one SF merchant personally that does, but I suspect its very few. Even more importantly, I'd be interested in how many of these Groupon customers are returning to the merchant. If that number is high than Groupon has hope, if its low then they aren't actually adding much value and they can only continue fleecing small businesses for so long.
- euroclydon 15y ago
  If you're a Groupon shopper, wouldn't the novelty, of say, going to that same spa wear off the second and third time you saw the deal? Similarly, if you keep selling your services on Groupon, don't you cheapen your brand. To me, there's not much incentive for repeat customers.
- twakefield 15y ago
  "I'd be very interested in a stat of how many of Groupon's merchants are operating these deals at a profit." Isn't the point that it brings customers in the door albeit at a loss? Hopefully, the future value of the customer is more than the loss on the initial deal. I think that's what your getting at with your subsequent sentences. I am not in the retail business so this is just conjecture but it seems to me that it's almost impossible to operate one of these deals at a profit. Basically, you are renting Groupon's sales machine and hopefully you convert a big percentage of the customers the deal brings in. I would also guess few retailers have the ability to present value the customers future revenue correctly and I'm sure Groupon will (if they haven't already) offer tools to measure that and justify the ROI of their deals.
  - shantanubala 15y ago
    Yeah -- it's a really bad setup in the end though because Groupon attracts the type of customer that isn't likely to spend a lot of money in the first place unless there is a deal. In other words, Groupon can attract a lot of customers, but the quality of those customers isn't very good (at least from my personal experience, all of the people I know who heavily use Groupon don't really use it at places they haven't already heard of before). The ROI must be terrible, but it also can be difficult to measure.

warmfuzzykitten 15y ago

I seriously question the loyalty of new Groupon customers. Typically they sign up because of one deal. They might even buy the deal. Then Groupon proceeds to spam them every day with deals they aren't remotely interested in, at locations far from their home. Unsubscribe.

potatolicious 15y ago
This. The problem is that Groupon's variety of merchants is very low - I suspect because it's only worthwhile to merchants with an incredibly wide profit margin (e.g., spas or other services that have low variable costs). I unsubscribed after I kept getting deals I had zero interest in. It seems once in a while they'll get a "big deal" from a well-known merchant to get people back in - but 99% of the deals I've seen from Groupon are utterly useless.

senthilnayagam 15y ago

Groupon Economy is Recession Economy, and groupon issues food coupons to it's members, merchants accept food coupon because they believe customers don't have money and selling at discount is better than no sale. If groupon don't make profit, nor the merchants it is surely bad for the company and it's investors

DaveRobertsAhoy 15y ago

Neither consumers nor businesses are loyal to Groupon. And the moment deals start to decline in quality, consumers will hit 'Unsubscribe' or 'Report as Spam' and it's Game Over for Groupon. I've already tired of their endless emails and blocked them. I'd be interested in seeing their churn rate - acquiring new customers to replace those that leave is going to increase in cost exponentially.

bonyt 15y ago

When we talk about Groupon's "repeat customers," I wonder who exactly they consider to be THEIR customers, their merchants or their subscribers.