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Why Groupon Not As Rosy As It Appears
Rambo Tribble writes "CNN is running an article detailing the dubious history of Eric Lefkofsky, Groupon's chairman and largest shareholder. It would seem Mr. Lefkofsky has an extensive history of taking investors' money for himself, then bankrupting the businesses invested in."
Another article posted today at TechCrunch explores one businesswoman's story of how working with Groupon was
the single worst business decision she ever made.
... as I read this article with a "groupon" ad on the side...
Onda Technology Institute
Yeah, she made almost every mistake she could (including offering a groupon worth 8x what a normal customer paid), and then they make it sound like groupon is terrible. Yes, offering a large discount and sharing 50% of the revenue on top of that has huge potential to lose you money. If you mishandle it, perhaps you should look at yourself first.
The only winning scenario for retail on Groupon is when you have excess inventory which will end up spoiled or heavily discounted anyways. In this case Groupon is awesome because not only do you make a few dollars on lousy stuff, you also take a shot at hooking a repeat customer or two. Just look at the Dell deals or at the bargain table outside your local bookstore... they've done it for years!
Using Groupon to give away your good stuff does not make sense.
lucm, indeed.
I highly recommend reading an article titled Groupon is Effectively Insolvent in which the author draws a compelling parallel between Groupon and a Ponzi scheme.
The whole Groupon thing reminds me of all the sites giving away stuff in the fall of '99.
Like $25 off a purchase of $25 or more with free shipping.
Not very many of those sites survived that Christmas.
Perhaps. I have a friend who runs a massage business. At the time her sale finished on Groupon for our area, she had amassed the most number of sales of anybody. The only reason she didn't have the highest margin is because there was an optometrist that had a higher price and sales even after the 50+% discount. She was booked up for months and, in her line of business, it is easy to have repeat customers (do a good job with the massage) and offer fair prices after.
I tried to advertise my computer repair shop, but they refused me saying they didn't see how there would be a mutual benefit. It was a cop-out, I think they just didn't want to deal with it (have any of you seen any tech related or repair related deals go up?) or they felt that my desire to have a limited number of coupons was not beneficial - they're probably correct.
In any case, I knew what I was getting in to. But all I was losing was my time - no resources or capital (no employees). But I can easily see how this may be a serious detriment to a normal small business.
Generally limited to 3x actual damages, IIRC (though IANAL). If the business had to pay up front for the advertising, they'd have a stronger claim, but since it's no cost to the business until the Groupon runs... I wouldn't count on winning much. Maybe if you just wanted satisfaction in small-claims court you could get it, but even that's probably not worth it.