I have never been a fan of Groupon, and when I say that it is not as a customer. Groupon has a business model that really makes the customers big winners in this game. Nothing wrong with that, but it is the businesses that is paying for the show, and they don`t want to lose.
The stock has been hammered. Take a look at the chart below.
Groupon Inc operates online commerce marketplaces worldwide that connects merchants to consumers by offering goods and services at a discount. Groupon offers deals on goods and services in three categories: Local deals (Local), Groupon Goods (Goods) and Groupon Getaways (Travel).
Its deals are accessed directly through its Websites, mobile applications and search engines. It`s impressive to see that Groupon grew from $312 million to $3,19 billion from 2010 to 2014. But now, it seems like the glory days are over.
What have happened?
First of all; in my opinion, the biggest winner in this game is the customer. Who are saying no to a great deal? No one. The customers are not paying to Groupon. They are paying to Groupon`s customer, which is the most important thing for Groupon. No customers – no income.
Groupon`s customers need to cut the bill in half. Voila! Groupon`s customer have already lost 50% of the original price. The end customer is satisfied of course, because who say no to 50% discount? The end customer pay to Groupon`s customer, but out of that, another 50% must go to Groupon, which means there is only 25% left to the supplier.
It could have been a good way to promote the business, but it seems like the end customer is the big winner. It depends on what business it is but customers who are paying for the products are not loyal. They will hunt for other discounts other places.
Not only that. Groupon has got a lot of competition from other companies. They are attacked from all sides. They have competition from e-commerce platforms like Amazon, Alibaba and eBay to name a few.
Not only e-commerce platforms are doing the same. Social platforms like Twitter and Facebook have both launched their own «Buy now» buttons. Again; customer are the big winners. Discount here and discount there. Discount everywhere.
Let`s say you sell product A for $1000. If you have your own customer base on Facebook, you can start a 50% discount campaign and still have 50% left without giving half of that to Groupon. It doesn`t matter for your customers, because they have 50% anyway, but it matters to you.
The management need to do something very fast.
Groupon announced it would cut 10 percent of its workforce and cease operations in some areas overseas. The company still have a lot of cash, and in a filing with the SEC, they says the restructuring will require a one-time charge of up to $35 million.
What they need to do is start focusing on their customers. Not their customers customers.
Click the link below and check out the Fan Fund
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