After it's much awaited IPO, Groupon's stocks has been trading below it's opening value of $20. In 2010 January, when I was first asked my opinion about Groupon and it's business model. I gave it a two thumbs down in value to merchants and sustainability as a whole. All while world was expecting the startup to be the fastest startup ever to break the $500million revenue. When every other .com company wanted to jump in the business of daily deals. When the world seemed headed in the trend of deals... I gave it two thumbs down. For reasons just simple professional opinion of how Groupon creates a win (deal finders) - lose (merchants) situation. And that it was no more than discount aggregator on steroids that was overcharging.
However, amdist all the negative views about the company and it's sustainability, value to merchants etc, and the recent 75,000 cupcakes fiasco. I'm going be be a little contrarian and give Groupon a two thumbs up. Not for the sake of it, but with good reason. Having launched TuxSeeDo into the market, here's where I see Groupon deliver value to the same retailers that we are trying to help.
- First, no cash upfront marketing. Where in the world can you find an advertising platform that reaches hundreds of thousands (in you locality) for nothing upfront? A simple 1 page advertisement on any newspaper would easily cost you thousands of dollars a day if not more.
- Cash upfront for sale. Yes what's better than cash upfront. Even before the customer has arrived at your shop, he/she has paid for the deal. So as a business you know for sure an X number of people are going to come, you have all the time to plan how you intend to make money out of them. If they don't come, then well... the money paid up front is your compensation for their "no-show".
- It's not Groupon's job to make the deal profitable. It's your own marketing/sales department's responisbility. Yes it is true that, you almost certainly make a loss on the sale on Groupon, but the deal/gimmick is your tactic to draw customers to your shop. So it's really up to the retailer to make the most out the effort.
On this note... Here are some reasons why retailers SHOULD work with Groupon and HOW they can make it work.
- Retailers offer discounts all the time and in all forms. Whether it's a discount because someone is buying in bulk, or for stock clearance. What better way to offer these discounts than to a platform that will do it for no upfront cost and takes cash upfront on your behalf. I vaguely remember in 2007/8, Dell had a group buying discount deal that was going for Dell computers. With every additional buyer, the price of the computer would be reduced. This goes up to a maximum of 30% for 20 or 30 buyers. But... the response wasn't very good and I think there were less than 10 buyers on each of the deals that I attempted to buy from. I'm pretty sure with the number of people at computer fairs (like the recent Sitex). A 30% off computers on Groupon would be snapped up in no time.
- Groupon is not an end in itself. As much as it looks like a e commerce site, it's not a distribution channel. It's a media/promotion channel. Comments on how Groupon deals are a loss to retailers are as rhetorical as saying that putting an ad on the newspaper or TV is cost to the company. In fact if properly planned as part of a sales strategy, Groupon could be a very low cost way of acquiring clients.Groupon is failing for those who have poorly planned their own sales strategy.
- Groupon while it may not have the right attributes to be promote customer loyalty, it has all the attributes to help re-activate dormant customers. Giving that little edge and attention to activate previous customer. The rest... is up to the retailer.
As a ending note. Groupon didn't pay me to write this. Neither am I invested in their IPO. And I'm not invested in any deals/group buying companies. In fact, TuxSeeDo competes with Groupon on some levels. But in all fairness, I'll like to balance some of my earlier less positive outlook of the company with similarly professional opinions of the benefits of such a service.
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