
The Best Groupon Deal Ever: 86.2% Off On GRPN at NASDAQ - npguy
http://statspotting.com/2012/11/the-best-groupon-deal-ever-grpn-at-2-76-usd/
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arbuge
Every article and comment I read on this topic seems to assert they're doing
badly because they're in a business with "no barriers to entry".

Building an email list of millions of people seems like a formidable barrier
to entry to me. Particularly so when the CPC cost for anything even vaguely
daily-deal related has shot through the roof over the last couple of years and
is in the $5-$10 range per click now. It usually takes several - several tens
of clicks to convert to an email subscription, depending on landing page.

Not to mention the cost of hiring and organizing thousands of salespeople
nationwide.

I don't recall precisely, but I believe that LivingSocial & Groupon are still
far bigger by market share than the rest of the players put together... that's
not what you get in a space where barriers to entry are low.

~~~
marknutter
Sure, it's hard being the first, but after Groupon became popular people
started actively looking for other deal sites. It became very easy to throw up
a site and gain a lot of traction. I helped one of my clients do just that and
they continue to see a lot of traffic to this day.

~~~
arbuge
How exactly did you get that traction? Curious as to what I'm missing...
doesn't look so easy to me.

~~~
melvinmt
Verticals and localization. I believe there are 50 Groupon clones in Turkey
alone and you can find a deal site in every single niche you can think of.

~~~
ngsayjoe
In Malaysia, there are over 80 groupon clones at some time ago.

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nekojima
Is this one of those Groupon deals you only buy once because either, you
realize it wasn't worth it, or a few weeks later its on again even cheaper?

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neya
Deals are in theory the most attractive segment of a given market. It would be
highly enlightening to know as to why Groupon is running at such a loss. The
way I see it - Deals are a win for the customer and the merchant (and Groupon
too). If that's the case, then why is Groupon struggling so much? Is there a
flaw in their strategy that someone can point out? Or, is it so that the Deals
space is overlooked by the merchants?? An in-depth analysis would greatly help
everyone.

~~~
suresk
I think it comes down to a few factors:

1) Their sales and marketing expenses are incredibly high.

2) I think the kind of deals Groupon does only work for some merchants - those
with high margins, new businesses, and those that are really good at upselling
once the customer gets in the door. There have been a lot of highly-publicized
accounts of merchants who felt like Groupon deals ended up being very bad for
them. The big hit the merchant takes sort of limits the amount and frequency
of repeat deals.

3) A ton of competitors have sprung up, since there is a fairly low barrier to
entry. In addition to some of the nationwide competitors, there are a lot of
local companies like newspapers and tv stations that already have good sales
networks and have been copying the Groupon model. This increases Groupon's
sales costs and probably squeezes their margins since they may have to offer
the merchant a bigger cut to compete.

I think it's a good concept and by being the most well-known business in the
space they have a pretty significant advantage, but I also think it is a
challenging market to be in and they are probably still overvalued.

~~~
jmilloy
It's strange to see both 1 and 3. If the expenses are inherently incredibly
high, then there couldn't be a low barrier to entry. Why are groupon's
expenses so high, then?

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taybin
Mismanagement can cause 1 as well.

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VonGuard
Frankly, I think ya'll hit the nail on the side, but not collectively on the
head. Take a little from column A, little from column B, and we can see the
real problems with Groupon. As one commenter said, they only work for certain
merchants with high markup. This is why there's so many Chiropracters and
massagers on these deal sites. Trouble is, all those services are once a year
kinda things. Thus, you get one massage on Groupon or Amazon or whatever, and
then next week they;re hawking another massage, are you gonna get it?

Combine this with the fact that Groupon is reknowned for being slow to pay
merchants. That's fine if yer paying back Wal-Mart, who has lots of money, but
for small businesses that use these services, 3 months waiting for payment can
be crippling. Read about Groupon's payment policies. They're assholes. Slow
assholes.

And finally, none of this was ever proprietary or complex. Groupon had no
firewalls or sandbags against competitors, and frankly, the way it treats its
client businesses, it was bound to be fucked eventually.

My folks have a boutique ad firm in a small town. For the past year, they've
gotten calls EVERY DAY from Groupon-like services, or even Groupon aggregators
who act as middlemen for these services. It's a hugely growing market but
never once has Groupon been at the table for one of these calls. They're being
eaten alive.

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leak
I've used Groupon many times to get deals. I know the majority of the costs
are in acquiring new merchants and that's probably why they're hurting so bad.
Why hasn't someone setup a site that allows merchants to do deals without the
need for a huge sales team? If merchants can login and just do a deal,
wouldn't that take away a lot of Groupon overhead is spent on?

~~~
brandnewlow
They did, years ago. No one used it.

I think there's a few reasons:

1\. Groupons have to be sold over the phone to merchants in order for Groupon
to get the margins and volume it wants.

2\. Local merchants just don't have a lot of time to spend learning software
and monitoring stats. They can talk to a sales rep over the phone more easily
than set up a deal themselves.

~~~
suresk
Another problem is controlling the quality of deals that merchants add. The
whole selling point of Groupon (and similar "deal" services that have sprung
up) is that they aren't just the run of the mill coupons you get in the mail
every week - they are generally big, interesting deals.

If Groupon sent you 100 deals every day that were "buy one get one free" or
"$1.00 off" or whatever, it wouldn't be very interesting and they'd likely
lose a lot of subscribers.

So, policing the quality of deals and working with merchants to make sure they
are offering a deal that fits with what you are doing is going to be a
significant source of overhead no matter what.

~~~
taf2
sounds like they could use or try similar logic to HN karma, voting etc... to
automate some of this... imagine if each purchase of a coupon was a vote and
the karma collected by a vendor gave them more freedom in posting new deals...

~~~
arbuge
not bad...

...the self-serving issue is the big issue though. Local merchants at this
point in time still don't do web-based self-serve solutions much or at all.
Maybe that will change as the world becomes internet-savvier in general, but
it's where we are right now.

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ronyeh
Clever title. I will write a note to myself that if I am ever offered ~$6
billion for a startup I create, that I will happily take the offer.

~~~
mattmaroon
Poor bayesian thinking. Facebook was probably offered similar amounts. And
Google. If you're offered $6b for a startup there's probably a 50% shot you're
worth much more.

~~~
blahzo
Dude... $6 billion. How much more can you possibly need?

~~~
mattmaroon
If that were the case you'd accept $10 million. The thing is you don't need
it, but your VCs do. And if your startup is worth $6 billion, you've probably
taken enough off the table that you don't even need that. So at that point why
not just maximize?

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eclipticplane
The only thing worse than Groupon's business practices with their merchants
are the Groupon customers themselves.

Groupon coerces local businesses into signing up with ridiculously high
discount rates with promises that it's "getting people in the door" -- the gut
reaction of the business is to sign up and then maybe some of those people
will be repeat customers!

Except most Groupon customers only signed up because it was crazy cheap. A
bouquet of a dozen roses for $10? They'll buy that. But a regular price
bouquet at $40? Nah. Very few will be repeat customers, and likely not enough
to cover the loss that Groupon's high discount cost the merchant. Also,
Groupon takes anywhere from 40-60% of the deal, plus a "credit card processing
fee" that's usually 3-4%.

Also, a big mistake (in my experience with Groupon) is that they do not have
an API for merchants to use. They should have allowed point of sale developers
to integrate with the Groupon redemption system. As it is now, the whole
redemption system can be a royal pain for a small business to account for
correctly in their POS system.

~~~
potatolicious
I agree Groupon is a terrible deal for many (most?) businesses, but it's not
coercion. Nobody held a gun to these businesses' head and forced them to sign
up, nor threatened them, nor anything really.

They sold these merchants a fairy tale about repeat customers - a too-good-to-
be-true fairy tale that merchants failed to verify on their own, and got
burned.

Now sufficient people have been burned that many merchants no longer take
Groupon seriously. That's fine, and that's the system working as intended.

> _"They should have allowed point of sale developers to integrate with the
> Groupon redemption system."_

This is much, much bigger thing than you suggest. For one thing, most "point
of sale systems" at small businesses are _cash registers_. They don't get
firmware updates, much less an internet connection and programmability.

For point of sale systems of higher sophistication (a restaurant, say), these
systems are _highly_ custom, closed as all hell, and integrating anything into
them without the express an dedicated intent of the original vendor is pretty
much impossible.

This is also why all attempts to disrupt the restaurant reservation/management
space have been so far unsuccessful. Integrating web-age software into
_extreme_ legacy meatspace systems is pretty much the hardest problem that
could be presented to a consumer internet company.

Groupon can pull _every_ engineer they have into this, chew on it for 2 years,
and barely make a dent. Hilariously enough, the feature you're talking about
is bigger than most companies.

~~~
eclipticplane
That's true, I used the wrong word. Groupon sales reps are dishonest, though.
We have roughly 80 offices in a bunch of states, and we have a national rep
with Groupon who managed all of our standardized deals. However, local reps
would still call each local office and try to sell them, and would quote sales
rates and repeat customer rates to offices -- numbers that Groupon had no way
to obtain, and were so far off the mark it bordered on being hilarious.

Another factor is that many businesses that try these steep discount programs
is that they are already on the rocks.

Another factor that bites merchants: refunds. Supposedly, when you mark a
Groupon code as "redeemed", Groupon won't refund the customer's money without
contacting you first. However, they sometimes still refund the money and try
to deduct it from your final check (which, for most merchants IIRC, is 60 days
after the close of the deal). This causes a lot of headaches for merchants
that have hard costs with their deals (product, inventory, etc). Sadly, some
number of Groupon customers request refunds even after redeeming their deal.
They are stealing, basically, and the merchant is the one that suffers.

> api stuff (couldn't find a good quote to pull from your awesome points,
> sorry!)

That's true for a lot of those markets you mentioned, definitely. A full-
fledged API would likely be difficult. There are other businesses that would
benefit, though, particularly some franchise units that are starting to use
web-based POS systems (per the last International Franchise Assoc conference I
attended).

If you were a local franchisee of a tanning salon, and your franchisor-
provided POS were Groupon-compatible, I'd think you would be more apt to sign
up.

The merchant console for Groupon is actually very basic, there's not a lot to
it. You sign in, view your deals, and can mark individual Groupon ID#s as
"redeemed". We wrote some terrible code to mock it into an API for our
franchisor system, using screen scraping and other monstrosities I am NOT
proud of. Do not open groupon.py.

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robryan
Previous threads on Groupon have suggested that the $6 billion dollar Google
deal would have never gone through.

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robertocr
This title is pure genius! Enough said.

~~~
npguy
Thanks ! Glad a lot of people liked the title !

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antidoh
I'm not a merchant, and I've never used a Groupon deal as a consumer. I say
that to show how disconnected I am from Groupon. And yet, I hear that
merchants often have trouble collecting whatever they're supposed to get from
Groupon; they're sort of the PayPal of deals. That rep must not be good for
sales.

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jcfrei
Groupon or rather GRPN might be under a lot of pressure now, because their
acquisition costs for new deals is (still) very high and they face tremendous
competition all over the globe (esp. from more versed local competitors - you
really need to know a local market to create good deals). anyway if groupon
stays innovative (for example in terms of their deals creation - eg. using an
automated process, rather than cold calling OR creating significant social
buzz around a lot of their deals) then I believe in the long term they have
one of the most sustainable businesses out there (although with rather low
margins)

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hkmurakami
_Note: Goods may be damaged_

~~~
npguy
And .. No money back :-)

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w33ble
Why do people insist on correlating poor IPO performance with a company that
somehow messed up? We keep seeing this with Zynga and Facebook too. These
companies didn't mess up, those that invested in the stock did.

I'm not saying Groupon is doing well, but to suggest that they should have
just sold to Google here is wrong; they still got their payout (the IPO) and
they still have their company to boot.

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stevewilhelm
My experience with Groupon deals is that they are not targeted to a small
enough geographic region.

People might be enticed to frequent a merchant outside of their normal
shopping area to take advantage of a deep discount, but very few will
permanently expand their shopping area.

I suspect most merchants don't see a permanent increase in repeat customers.

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gtani
Here's a ZNGA funny

<https://twitter.com/maxticket/status/260825571712458752>

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cdjarrell
Great title. Seriously though what type of barriers do you think they could
have put up? Exclusive deals?

~~~
npguy
They must have gone lighter on the margins with the merchants and locked them
in. One example I can think of, is to have merchants accept Groupon coins,
like Bitcoins, and make people gain Groupon coins elsewhere.

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mhartl
The _Schadenfraude_ is strong in this one.

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brennenHN
The title of this article is amazing.

~~~
npguy
Thanks! Like I mentioned before, I am glad a lot of people liked the title!

