The rapid rise and fall of daily deal Web sites
washingtonpost.com
washingtonpost.com
I think this is the most interesting paragraph in the submitted article: "As critical as I am of Groupon, the slam dunk case is to sign up with Groupon if you’re going bankrupt. I strongly encourage every business that is about to go under to call Groupon. (Don’t tell them Rocky sent you.) It makes total financial sense--as a Hail Mary play. If you’re lucky, the upfront cash will be enough to help you stay afloat. If not, well, you were already going out of business. It may be your best option. In the short term, you’re actually helping Groupon because they’re being valued on revenue and no one is taking into account risk."
If word of this gets around, the incentives set up by the typical Groupon agreement with a merchant will be responded to by merchants for whom those incentives are the most perverse. Groupon may discover that it is inexorably moving into the business of last-ditch financing for failing businesses.
[1] 13 June 2011 TechCrunch story by Rocky Agrawal: http://techcrunch.com/2011/06/13/why-groupon-is-poised-for-c...
[2] Hacker News discussion of story: https://news.ycombinator.com/item?id=2649739
I purchased a voucher for a Sushi restaurant in NYC on LivingSocial. Two days after purchase, I went to the place for dinner. I was surprised to find the place closed and a big sticker from the State of New York on the door stating that the property has been confiscated due to failure to pay their taxes.
Somehow, I think the proprietors knew what was going to happen and when ... and scheduled things appropriately. I got a refund, but I'm not sure LivingSocial did.
http://www.bankruptcylawnetwork.com/bankruptcy-discharge-and...
You could collect a lot of money through Groupon, declare bankruptcy, Groupon could object to the discharge of the money you owe them, the judge could refuse to discharge the fraudulent debt and then you would find yourself having gone through bankruptcy but still be in debt.
The actual Groupon business model was a loss for merchants from day one, but they were sold on potential benefits (new customers or regular customers increasing their spend). It doesn't take long for a business owner to notice they're losing money on a deal, and so it should be no surprise that Groupon's reality quickly overcame Groupon's sales hype.
(Please note that I have no knowledge of what was or was not known inside Groupon and there are certainly psychological studies that show you won't necessarily identify with a reality that contradicts your perception).
I can assure you that my wife, bless her heart, will see a deal somewhere, utilize that deal, and then write off that business until another deal comes along.
Not sustainable as a marketing strategy as it definitely attracts the wrong type of customer.
While it makes the place look busy, the conversion rate is just not there for it to be sustainable. Not to mention some of the things I've heard about groupon itself which just seems shady.
Groupon generally passed the first test: get customers through the door at a reasonable cost. The problem is that people bought groupons specifically for things they wouldn't buy normally. So, it turned out to be advertising to a bad market.
My daughter was seriously considering a two-for-the-price-of-one tethered parachuting deal. Her mom and I weren't terribly thrilled by the idea of her jumping out of an airplane even once!
> That's an oversimplification I think. Groupon was a method of advertising that merchants paid for with their goods.
Is there really a difference or did you just word it differently ? Or maybe do you think merchants paid with their goods to be advertised on groupon websites ? Because that seems far-fetched to me (and quite an expensive ad) but it makes sense.
Also, flash sales sites tend to be more focused and give the appearance that you are dealing directly with the site owner; not a third party aggregating deals.
So, to me, there are two types of daily deal sites.
1) Flash Sales (Steep and Cheap, NoMoreRack)
2) Voucher Sales (Groupon, Living Social)
I feel like the physical goods space will always do better than a voucher-based deal site.
Talk to any Groupon sales associate and they'll tell you the company is doing just fine.
The company is already transitioning (successfully) beyond a daily deals site; the deals now represent about 20% of their total revenue.
Sales turnover is always high in any position that involves a lot of cold calling. It's nothing to do with Groupon per se and everything to do with the inherent nature of the position. Relative to other high-frequency, transactional sales organizations, Groupon's turnover is likely below average.
Happens with cryptocurrencies too.
Or: Both parties are right for their own reasons and are simply talking past each other.
What's failed to materialize is any ROI on the Groupon "advertising" channel. The ads aren't working. Therefore the merchants are no longer buying.
I actually thought that's what the article would have refereed to as well, but as far as I'm aware, Woot! and similar sites are doing just fine. Woot! in particular is owned by Amazon now and has several dozen "daily deals" open at any given time now.
Maybe Woot is the post-Groupon. After you Groupon'ed your business to death by slashing your revenues 75% at a time, folks like Woot get to sell off the skeleton. As long as businesses keep failing and inventory management keeps sucking, Woot will have plenty of business.
That's actually a thought though: a lot of liquidation inventory comes not from outright failing businesses but just really poor demand forecasting and logistics. With improvements in these fields Woot may find it harder and harder to source compelling products.
Or it could go the other way! Woot seems to have no shortage of goods to liquidate (notice the proliferation of "sub-woots", like "woot tshirts") so perhaps as demand is better forecast, quantity of surplus of any one good will decrease, increasing the variety and decreasing the amount of time any one item features on their front page... which could be very good for them.
Edit: "The deal-of-the-day concept gained popularity with the launching of Woot.com in July 2004, although Woot itself was a modified version of earlier dot-com bubble sites such as uBid. By late 2006, the deal-of-the-day industry had greatly expanded to over 100 deal-a-day sites. In November 2008, Groupon entered the market and became the second fastest online company to reach a billion-dollar valuation.[2]"
I never visited Groupon, that's not the type of deals I'm looking for.
Sites I look at are woot.com, dealnews.com, bitsdujour.com slickdeals.net, etc...
Groupon is for the masses.