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Groupon felt a bit like a multi-level-marketing scheme to me. They hired lots and lots of sales people, whose job it was to convince unsuspecting businesses to
by newaccount74 4y ago
Groupon felt a bit like a multi-level-marketing scheme to me. They hired lots and lots of sales people, whose job it was to convince unsuspecting businesses to offer a groupon.
A restaurant owner I worked with agreed to run a Groupon. They offered a 40€ dinner for two at a 50% discount for 20€. That was already a fantastic deal. But Groupon took 50%, so the restaurant owner got only 10€ per sale. They sold a lot of them.
The Groupon sales person promised them that this would be great advertising, that people would bring their friends, and that they could sell fancy drinks and cocktails to the guests, so they would make a lot of money.
So over the next 6 months or so, every day a few people would show up, redeem their Groupon to get their 40€ meal, order no drinks, and never come back again.
It was a really shitty deal for the restaurant, but it was a fantastic deal for groupon -- they got a 50% cut for selling a ridiculously cheap meal.
Of course, no business owner in their right mind would ever agree to such a crappy deal a second time. So the success of Groupon was based on finding new, unsuspecting businesses who could be talked into offering such a sweet deal.
In the beginning, with all the hype, that was an easy task. So they saw huge growth at the beginning. But it wasn't sustainable growth. Groupon was exploiting hapless business owners that haven't yet been burned by sleazy marketers.
As soon as the too-good-to-be-true deals became less frequent, Groupons customers also started leaving.
I don't understand how anybody who knew anything about the business could think that this was sustainable.
- tiffanyh 4y agoAgreed. Seemed to only make sense for companies who had no variable cost to use Groupon. Eg airlines to fill last minute remaining seats. Or museums to drive more foot traffic on historic slow days.
- anotheruser13 4y agoNot necessarily. When I worked for what was the largest floral delivery company, we were all miserable when a Groupon or LivingSocial came out. The people that used those never read the T&Cs, and complained incessantly about everything under the sun. The florists hated them, too, for good reasons. It really killed their income.
- standardUser 4y agoSo true, and consumers like me could tell businesses hated it and ended up turned off by the entire concept.
- onlyrealcuzzo 4y agoIn theory, Groupon was just supposed to be a good way to distribute coupons. If you think coupons are a good business model, then Groupon makes sense as a distribution model. If you don't, then I'm not sure why you would think Groupon would magically make coupons better.
- standardUser 4y agoI think that Groupons salespeople were getting massive concessions from the businesses they signed up, way beyond what a normal coupon or ad campaign might cost them. That's just my speculation based on the magnitude of a lot of the deals I used to see and the anger I heard from some of the businesses I talked to about it.
- pessimizer 4y agoCoupons were just a means of identification; Groupon was supposed to be a way to organize bulk purchases by groups of people who didn't know each other. Investment turned it into a way to trick businesses into thinking that making their main product a loss leader was a wise choice. Really the social networking version of a buyers' club.
- saiya-jin 4y agoThere are many variants out there, ie what we have here in Switzerland (buyclub, mostly Geneva) has mandatory drink per person, 5$ minimum, and also usually discount is often 40% and not 50%, no cashback. When we use it we always paid quite a bit on top already-paid discount, happily (starters, cakes, drinks, coffee all ads up). Often same places keep reappearing on the offer, so it doesn't seem to be bad deal for them. Deals don't come very frequently, have strict limit on total coupons count (ie 200, 500), how many per user, timeout etc. Another variant of the concept is ie La fourchette (the fork), where you can get similar deals, but they are either permanent deals or stay around for longer, so if you don't have anything specific in mind you just search what is available around. Similar rules for drinks.
- 88913527 4y agoPrice-conscious consumers will absolutely take a good deal but build no brand loyalty. They'll hop from sale to sale. Businesses live and die by customer acquisition costs. You're better off offering deals to customers who've already demonstrated a willingness to pay near-MSRP regularly, and offer deals if they start dropping off, to get them buying again. Groupon just proved, at a larger scale, what was always present in consumer behavior. Of course it wasn't going to be sustainable just like click-through rates for ads dropped off once people got used to their placement at a particular location in the search results. In this case, Groupon capitalized on small-business owners who had a poor grasp of how consumers work.
- akudha 4y agoI don't understand how anybody who knew anything about the business could think that this was sustainable. Are you talking about Groupon here or the businesses? I'd guess Groupon fully knew what they were doing - they know they have a small window where they need to make a killing. Why do they care after that? Why do they care if they screwed over thousands of small businesses? They'll just move on to the next legal scam. I suppose it is upto the businesses to not fall for such one sided schemes. Maybe it is peer pressure, if every business around them is doing it, they feel pressured to do it too? Maybe a restaurant owner is good at making food, but not that good at running a business? I hate companies like Groupon...
- newaccount74 4y agoI was talking about the people who invested in Groupon. They should care about the sustainability of the business, because otherwise their investment will have no value.
- phendrenad2 4y agoSeems like a classic rug-pull to me. Early investors get out soon after the IPO, while retail investors are still pushing it higher.
- just3ws 4y agoThey walked away from a 6B acquisition by Google. They did believe the sky was the limit. I was not in the specific meetings but was there for everything around it. There was a sense of optimism no matter how naive it was in hindsight.