Groupon shares fall as merchants cut back on deals | Hacker News Reader

Groupon shares fall as merchants cut back on deals

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55 pointsFluidDjango28 comments

Here is my take on the whole Groupon thing. Every small business should give customers, especially first time customers, a discount. We used to print in the local news paper "buy 1 get 1 free ciagar" specials and pay the paper $250 for that ad. It wasn't really worth it but we did it every month because our competitor was doing it.

This is what I see is happening with a lot of small businesses. I don't think the issue is really Groupon so much as it is the businesses not understanding what to do with these new customers. If they're just in there for the deal, they won't come back after they get the deal. This is from first hand experience.

We got customers coming back because the deal was just to bring them in. That was all. It wasn't even to find new customers. We just wanted traffic. Once we got the customers, each of us who worked there had a responsibility to get the customers excited about coming back. We were masters at it. These small business lack that skill and it has nothing to do with Groupon or any other deal advertising platform (including newspapers).

I go to Starbucks every single morning. I buy a cup of coffee, and something to eat. I tip. I'm polite and friendly; I don't leave a mess and I don't leach too much wifi.

One morning I get there and there's a long queue. People don't know what they're doing - they're taking ages looking at the menu and choosing drinks and trying to order them and arguing over the drinks they're eventually given. And they all get a pack of beans, ground to how they like. And then I notice that they're handing in a coupon from a newspaper.

So: I don't get free stuff; I do get worse service; staff get a bunch of rude people who are only after the free beans. I was grumpy. Staff were grumpy.

Customers don't care about "free stuff" or even prices. They care about service. This is my point. GroupOn may help bring in the customers with the coupons but customers don't go back because of prices (not so much). If the experience sucks, it sucks and that's it.

Customers don't care about "free stuff" or even prices. They care about service.

I would love to see some data on that, because I have a really hard time believing it. Otherwise I'd struggle to explain how Walmart has ever been successful.

It really depends on the expectations that the business sets. Customers go to Walmart for the cheap stuff. Some people may go to Starbucks for the experience. If you go for the experience and you get bad customer service then you will never go back.

I care about free stuff if random fuckbags are getting it and me, a loyal customer, isn't getting it.

And it is because I care about service that I don't want floods of idiots blocking my queue and being rude to staff (who then have to serve me) just so the can grab a free thing and go.

"Groupon, in fact, said in a June IPO filing that offering merchants more favorable terms may cut into its profits."

Does Groupon actually have any profits, or do they really mean "exacerbate its losses"?

We increased our revenue from $1.2 million in the second quarter of 2009 to $430.2 million in the third quarter of 2011. We generated these revenues from gross billings of $3.3 million for the second quarter of 2009 as compared to gross billings of $1,157.2 million for the third quarter of 2011. We had net income of $21,000 for the second quarter of 2009 as compared to a net loss of $10.6 million for the third quarter of 2011.

Source: Groupon, Inc. Form 424B4 Prospectus (http://investor.groupon.com/secfiling.cfm?filingID=1047469-1...)

Edit: So to answer your question, exacerbate its losses.

Amazing to me how a company can gross $1.1B and end up at a loss at the end of that. Almost feels pointless.

Eh, I'm sure some hefty salaries being paid with the revenues makes employees happy at least.

I'm sure Groupon will get things under control, but I think the cut in fees and less frequent participation of merchants will offset any revenue growth. Just more investing on hype I guess.

>Eh, I'm sure some hefty salaries being paid with the revenues makes employees happy at least.

We grew from 37 employees as of June 30, 2009 to 10,418 employees as of September 30, 2011.

If not hefty, than numerous...

Why Groupon employs over 10k people is beyond me, even if most of their employees are in accounts/sales it seems those numbers are a bit excessive. I have personally worked as a salesman for over 4 years, personally handling hundreds of clients on 5 different continents. I'm now very curious to know what its like to work at Groupon.

Groupon is in about 250 markets I think. So, that is 40 people per market. If half are customer support, that would be like 20 people per market in sales. That would mean the average salesperson, sets up 1 deal/month. Although, they probably churn through sales-people. So, if half the sales people are totally incompetent, that might be two deals per salesperson per month. Plus, there is probably some other stuff with Groupon Now.

I used to work at a "Groupon for X" startup and I can say that only closing 1 deal per month would be catastrophic results for a salesperson. I can't speak for Groupon, but I would put their targets at around 10-12 closed deals per month.

Do you sell to local small businesses? From my experience restaurant owners/massage clinics/etc can be VERY high touch.

I like how they focus on the revenues, as if to try and distract from the nets.

Exactly what we've seen. Our first Groupon was at a 50/50 split, no exceptions, no wiggle room. Our latest was at 70/30 in our favour.

Was it a difficult negotiation?

I can't imagine that it was. Having worked at a deals startup myself and spoken with many business owners who have done Groupon/LS, all they have to tell the company is "Well [insert competitor here] is giving me 70/30". They'd rather lower their commission than walk away from the deal. This will be a slow race to the bottom, although I'm encouraged to see Groupon experimenting with loyalty and analytics components. Regardless of popular sentiment, the SMB space has been underserved for awhile now and if they do figure out how to make it work, then they'll own local. I wouldn't count them out just yet.

Not in the least. They, and other daily deal sites, will take whatever they can get.

The "daily deal" space is rapidly being turned into a commodity service. I'd expect the splits to become even more favorable for merchants. How low can it go? Probably all the way to 10% or less for Groupon.

Yup, and the lower the discount, the less excited the customers. Groupon is example of there being no free lunch.

Of course you can make customers happy.. anyone can.. just give stuff for free or 50% off, but how do you create value without giving it away? Groupon has no answer for that

Which they seem to be nowhere near efficient enough in closing sales to local business to make money at that rate. Maybe eventually after every local business has been introduced to the concept if it really has legs it will become self service.

A point I make again and again is: how will Groupon compete against copycats, large players and niche-specific versions of it's service?

So far the only thing I've heard is crickets... Groupon as a service is a great idea, as a stock, GRPN is overpriced.

That's the "race to the bottom" effect in a market with low barriers to entry.

Groupon's business is compiling and maintaining two lists: (1) a list of local businesses, and (2) a list of email subscribers.

How it took billions of dollars and tens of thousands of employees to compile those lists, I will never understand. I still cringe every time I hear people promising that the "local market" will be "HUGE".

This is another company which is going to die a slow, painful death. I think the overall consensus is they're done, but they continue to plod along, losing money as they go.

They can only continue to churn their losses for so long. At some point, it's going to go from a slow drain to a quick exit. I'd keep an eye for them buying their stock back and layoffs.

Everybody who bought Groupon shares deserves to loose some money. The writing was on the wall.

Some financial institutions tried to sell Groupon as a great thing (and they probably taken their profits and ran).

did the ipo turn out to be a better payout than google offered them?

Thats hard to say, because I don't know what google was really going to buy. 51% of the company for 6 billion? Or were they going to acquire everything?

Right now I believe Groupon's valuation is around 25 billion, but they only offered something like 10% of their shares for public bidding.

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