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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.
Damn I was hoping this was going to be about how coupon sites attract women to install toolbars and download viruses.
I already assumed large consumer-whore businesses had crooked chairmen...
It seems that the point of this story is you shouldn't get into marketing plans if you don't know what you're doing. She didn't have a computer, she doesn't understand how statistics works, she didn't know what to do with expired coupons (nicely say "no" and offer some other type of discount to make them feel like they are still getting,) she admittedly didn't do anything to convert Groupon customers to regular customers.
The world is full of companies have failed because they didn't understand the market. It's not the fault of Groupon that she allowed herself to be talked into something that she clearly didn't understand. We're all adults here.
Take a look at how Groupon works. It cannot possibly be truly beneficial to any business. For every "groupon" purchased for a business, the business takes a loss and the people looking for a deal rarely come back. So you're paying a lot for "advertising" that you'll never possibly see a return on investment from because you're never going to get new, repeat, life-long customers from it.
It's a shame and a scam. I pity the businesses that use Groupon, LivingSocial, and the ilk, they'll never survive the long haul.
He would have taken the $6,000,000,000 that Google offered him for Groupon.
This is what doesn't add up.
"At the time, she didnâ(TM)t have a computer"
Her online presence, including a blog, Facebook and Twitter is well above average for a local business.
Who has those presences and can't get a $10 total laughingstock computer to run a text file to search the coupon numbers?
My first Journal Entry ever, in 8 years! http://slashdot.org/journal/365947/aphelion-scifi-fantasy-horror-poetry-webzine
hey, that's the world we live in. Suck it up.
We can do better.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
Exactly what value does Groupon add to the economy (assuming here marketing !=economic value)
Well, your core assumption is simply crap. Marketing adds tremendous economic value. Marketing allows companies to get their product before people who otherwise wouldn't know about it. Marketing is a key driver to economic growth. If customers can't find business, business don't survive.
I wouldn't worry too much about consumers throughout the US not caring about saving (the current "bubble" is NOT in a general boom economy like last time!) What I'd worry about is the companies offering the deals realizing that selling hundreds of discounts that after a 1/2 off rebate and Groupon's cut give them about 30% of their normal revenue. That's a pretty steep discount for a bit of advertising, and I can't see Groupon continuing to find that many suckers, er businesses at that margin...
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.
What they meant was, "at the time, she didn't have a computer[ized cash register]". (Or "computer in the coffee shop," at least.)Lots of small businesses don't have that.
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
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.
It's possible, I'll take your word for it, but with so much new, interesting, relevant and non-duplicate stuff on slashdot everyday, I never get the chance to visit other websites...
Onda Technology Institute
Eric Lefkofsky may have a 'dubious history', but how is this any different from what's been going on for the past 15 years? From Pixelon to Webvan it's been one fraud after another.
Oh it's great for consumers. I use it all the time (and Living Social) to get great deals at places I either already go to or will go to once. But I own a couple of small businesses and would never in a million years sign up with these people. It is a sure-fired money loser, because you lose money on every coupon, and the kind of people who buy and redeem these things are deal hunters who will most likely not make good long-term customers.
We don't have a state-run media we have a media-run state.
Somebody who gets someone else do do all that kind of shit for them?
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
When a buyout offer happens one company to another, having the offer made and accepted is only the initial stages. It is kinda like buying a house. Google's people would then meet with Groupon's people, NDAs would be signed, and Google would start looking over the books, technology, and so on before committing to a final purchase.
They could have very well realized that things wouldn't stand up to Google's scrutiny and Google would have backed out. Now that would really screw them because then if they try to go public everyone would ask "But why did Google back out?"
In Poland one of well-known barbers, Jaroslaw Budny, opened a new barber shop and wanted a bit of promotion. He talked with Groupon, and based on their advice he issued haircut coupons at 29 PLN (instead of usual 70PLN). He only got 10 PLN out of each sale (33%) . Barber was however convinced by Groupon salesperson to not put any limit on number (they earn by number of coupons sold) who said things like "you will be lucky to sell 300 coupons, 100 is more realistic number, no need for limit". Sales were limited to 48 hours though.
Guess what? People bought over 1600 coupons.
Mr Budny is now working 7-22, not making any money, getting angry calls from thousands of "groupon customers". His name is now shattered and smeared all over internet for not keeping promises instead of being promoted. Waiting time to get a haircut done by him is now about a year.
Did he make a bad decision? Yes, he did not limit his offer, but he did so on explicit advice by Groupon. It is scary that Groupon doesn't have any internal audits to make sure they don't do that to businesses - they should have if they have some ethics.
Only after country-wide media ran the story he was contacted by Groupon who offered him some help (hire him a secretary to take calls, run another promotion without taking money, send email to coupon buyers explaining why waiting time is so long, offer money back and "sorry" gifts). Condition was that he no longer talks with any media about Groupon.
*) disclaimer: above information based is based on articles widely available in Polish press.
Groupon has a simple mechanism it tries to sell: Get people in your store at any cost, then make a profit when they return.
Normal advertising with discounts works differently, take for instance the special deals from your local super-market: We buy a larger amount then normal, at a discount, then pass this discount on to you, making less on the individual sale but more real sales.
3 for the price of 2 is a typical format.
Any side affect of attracting more customers is welcome BUT the supermarket owner will NOT think that customers who come in specially for that deal will convert to regular customers at any significant rate.
Some other forms of discount are: We have to much stock and keeping it costs more then selling it with a smaller profit or even at cost. We want to shift a lot in a small time frame so we "pretend" to give you a discount but really we are not. And We need the sales so we give a massive discount to be able to close the books of a period with mass amount of revenue (In holland large chains holding "no sales tax" days.)
Most of these discounts are aimed purely at selling an item, the discount is a way to make a sale that delivers a profit then and there. NOT some mythical future increase in your customer base.
Groupon therefor is based on a rarely successful attempt of advertising, getting the cheap who look for deals and convert them into full paying customers. Contradiction in terms? What can possibly convert a bargain hunter into a loyal customer? Amazing service? Sure, if your amazing service is worth a 50% increase in price. Lets not forget that groupon discounts are also often insanely high. And on top of the discount, you also got to pay groupon a premium rate well above any other form of advertising.
And then it is aimed not at large companies that can make long term investments but mom&pop shops that struggle to reach the end of the month in the black.
It is a scam and Groupon will fail soon enough because it has decided to go world wide where the laws are a bit more protective of people and small businesses. In the meantime, if you own a small business and get contacted by Groupon. Don't.
The pizza place mentioned in the story? A success because they did it twice? I wouldn't assume that. Lots of small business owner have no real way to track costs and benefits. They just know there is X in the register at the end of the day and that is a LOT more then normal. The real costs of making the X amount of revenue comes later.
Simple example, from personal experience. Had a guy very happy who was selling power tools over the internet he had made a small fortune in revenue in the first week. And the cost of ordering the powertools was even LESS then the revenue, even with shipping costs substracted... pure profit!!! He forgot about returns, and warranties and etc etc etc. Do you know just how much a single customer complaining and needing to be talked to for an hour costs? Why do you think companies want as little customer support time as possible? Because it costs are high and it all comes out of the tiny amount of profit you thought you made on the sale.
In business, you can make a ton of cash and still go bankrupt. Groupon is the perfect way to do this. Stay well clear.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
I'm not sure /. gets anything just for impressions (rather than clicks) but the ads don't really bother me, and as I don't donate and spend lots of time here, I haven't disabled them. My way of saying thanks...
So obviously you never RTFA..... :)
"City hall" in German is "Rathaus" Kinda explains a few things......
What's spelled incorrectly there? I don't see it. I don't even see any grammar atrocities.
"City hall" in German is "Rathaus" Kinda explains a few things......
AC is a douche. There's nothing wrong with your spelling.
Only thing wrong with your post is lack of capitalization on the last two sentences, and starting the last one with "and". :-/
But since that's not what AC quoted, I'm assuming they didn't even notice that, because they were too busy thinking you spelled "ad" without the second "d".
"City hall" in German is "Rathaus" Kinda explains a few things......
hey, that's the world we live in. Suck it up.
We can do better.
But we don't.
That's a pretty steep discount for a bit of advertising, and I can't see Groupon continuing to find that many suckers, er businesses at that margin...
In comparison however, running a regular advertising campaign can cost many thousands of bucks is straight cash payments - so potentially using that budgeted money for this type of offer might make sense. For a service oriented businesses the increased traffic could make up for the decreased margin. For example if your hair stylists are sitting around with empty chairs, putting a person into one at any price is a net gain since your overhead is a constant.
It does seem however that these types of offers are not very good at creating repeat business without the the discount, so traditional advertisement might be more useful.
In many states in the US, if someone pays you $X, you are required to provide $X of service, and you can't have an expiration on it.
So, you can advertise a coupon where someone pays you $X for $2X of services, and you can put an expiration date on it, but you're still legally required to redeem the $2X coupon for the $X paid for it even after expiration.
paintball