Is Groupon Doomed?

Crain's article on Groupon's perceived need to grow in order to survive:

http://www.chicagobusiness.com/article/20120714/ISSUE01/307149986/a...

I say it's not going to be around 2 years from now.

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Permalink Reply by Far'arned Retrogrumpalunkus #63 on July 16, 2012 at 2:53am

My personal opinion on groupon is that it does not serve the needs of smaller businesses very well.  They demand large runs of coupons/deals which put WAY too large of a burden on a smaller business.   I've talked to a few resteraunteurs who said that they heard stories of groupon ruining other small independent restaurants by forcing them to bite off way more than they can chew as far as their coupons/regular revenue stream.  And that they would never use them for fear of it happening to them.  This same issue hurts other small service and retail shops as well.

But the Groupon philosophy does work well with other, larger, chains and retailers with much larger sales footprints.   The problem for Groupon is that this segment of the market, while large in sales numbers, is not as large in the number of unique businesses that can avail themselves of Groupon's services.   So they are marketing to a smaller number of businesses who can use them and this is their Achilles Heel. 

I don't know if Groupon can even re-tool their philosophy to better cater to smaller businesses or if such small potatoes can be profitable for them even if they could pull in a lot more of them in aggregate.    This is a huge problem in the long term as they try to "grow" once they have moved beyond the "fresh new idea" stage of their business cycle and are competing with many more and hungry similar copy-cat coupon sites.  The smaller sites might fail too -but that doesn't help Groupon in the end if the whole concept is failing in the long run.

I agree that in a few years we'll see Groupon gasping for breath like a fish out of water that seems to have dried up. I see they are trying to become a giant and grow out of their issues with a massive economy of scale and global dominance.   I just don't see that happening.  It's not a company I would want to invest my own money into.  

But in the end the final arbiter of this will be the market.   Groupon will sink or swim on its own merits and the strength or weaknesses of their business model.   Such is the business cycle.   

Permalink Reply by in it to win it 8.0 mi on July 16, 2012 at 6:07am

The business model will likely change.  Like Blockbuster today is not the Blockbuster of the past.

Groupon will continue, albeit in a different fashion.

 

Permalink Reply by Liz on July 16, 2012 at 7:02am

Groupon's initial push and growth had so much to do with it being a fresh concept, and its ability to get a LOT of small businesses, now that the small businesses have realized it burns them and there are SOOOOO many competitors, I doubt you'll see Groupon expand beyond its current size without major change.  Personally I don't think its really bad for businesses not to grow, as long as a business can maintain its size, share of the market place and keep itself interesting enough to still draw attention, there's no need for constant growth aside from pleasing investors.  

There's way too much focus on today's business to grow beyond their means.  Its how so many of the terrible decisions got made and why jobs will be sent overseas in a heartbeat if it means .01% growth for an item. 

James BlackHeron said:

I don't know if Groupon can even re-tool their philosophy to better cater to smaller businesses or if such small potatoes can be profitable for them even if they could pull in a lot more of them in aggregate.    This is a huge problem in the long term as they try to "grow" once they have moved beyond the "fresh new idea" stage of their business cycle and are competing with many more and hungry similar copy-cat coupon sites.  The smaller sites might fail too -but that doesn't help Groupon in the end if the whole concept is failing in the long run.

Permalink Reply by rb on July 16, 2012 at 7:47am

Totally agree that growth for growth's sake has really hurt some companies. If held privately a company can really look towards pleasing their customers and growing organically if they wish.

One of GRPN's biggest liabilities is Andrew Mason, investors are really starting to question he knows what he is doing (kind of late IMHO). Just about any pivot the company makes from now on will be 2nd and 3rd guessed coming from him.

They have a huge database, they need to learn how to really leverage this to satisfy their investors. Don't think they have identified anything close to a silver bullet yet.

Liz said:

Groupon's initial push and growth had so much to do with it being a fresh concept, and its ability to get a LOT of small businesses, now that the small businesses have realized it burns them and there are SOOOOO many competitors, I doubt you'll see Groupon expand beyond its current size without major change.  Personally I don't think its really bad for businesses not to grow, as long as a business can maintain its size, share of the market place and keep itself interesting enough to still draw attention, there's no need for constant growth aside from pleasing investors.  

There's way too much focus on today's business to grow beyond their means.  Its how so many of the terrible decisions got made and why jobs will be sent overseas in a heartbeat if it means .01% growth for an item. 

James BlackHeron said:

I don't know if Groupon can even re-tool their philosophy to better cater to smaller businesses or if such small potatoes can be profitable for them even if they could pull in a lot more of them in aggregate.    This is a huge problem in the long term as they try to "grow" once they have moved beyond the "fresh new idea" stage of their business cycle and are competing with many more and hungry similar copy-cat coupon sites.  The smaller sites might fail too -but that doesn't help Groupon in the end if the whole concept is failing in the long run.

Permalink Reply by Far'arned Retrogrumpalunkus #63 on July 16, 2012 at 9:09am

Can we add Facebook into the discussion now?

Paul Gnarlo said:

 

I am not kidding when I say I am looking for some investors to start up a hedge fund solely dedicated to shorting IPO's led by Lefkofsky/Keywell/Lightbank. I would go so far as to call these men/their "businesses" modern day Ponzi's.  Please see my tweets below to them.

 

http://twitter.com/PaulGnarlo

Permalink Reply by Mike Fiasco on July 16, 2012 at 10:22am

I've heard of businesses who have done well by Groupon promotions and those who have fared poorly.  The one thing in common is that the businessowners found out how greedy Groupon members are. 

 

People with 50% off groupons are mobbing businesses before the sale starts (I'll be out of town) or after it closes (I was out of town), asking for special orders, demanding to take their business away (they were never there before the Groupon), counterfeit coupons, and other skeezy behavior.

 

Any time someone talks about corporate greed, I'll have a lot of stories about consumer greed.

Permalink Reply by Doug Haynes on July 16, 2012 at 10:28am

I will agree.  I have worked places that have offered a Groupon deal and some of the Groupon customers were some of the most entitled customers I have ever dealt with.

Mike Fiasco said:

I've heard of businesses who have done well by Groupon promotions and those who have fared poorly.  The one thing in common is that the businessowners found out how greedy Groupon members are. 

 

People with 50% off groupons are mobbing businesses before the sale starts (I'll be out of town) or after it closes (I was out of town), asking for special orders, demanding to take their business away (they were never there before the Groupon), counterfeit coupons, and other skeezy behavior.

 

Any time someone talks about corporate greed, I'll have a lot of stories about consumer greed.

Permalink Reply by S on July 16, 2012 at 10:42am

I always kind of assume that if a small business offers a groupon that they're either desperate for immediate cash flow due to finance issues or will be running into cash flow problems down the road when people start using the groupons.  It might not be fair but if a service based business like a salon sells 500 groupons for haircuts that need to used over the next 6 months, I'm pretty sure that their regular customers are going to be squeezed out of their regular bookings.

Permalink Reply by Liz on July 16, 2012 at 11:14am

They filed way too quickly, and I still can't figure out why so many invested in such a young company.  

Serge Lubomudrov said:

I suspect that the biggest problem the Groupon had (and probably still has) is that they were not very upcoming with their prospective investors about the company's real revenues. That's why one of their VPs, whom Groupon had stolen from Google a year or so prior (and gave her the highest annual salary for an employee ever, half a million annually), left right before their IPO filing.

Permalink Reply by Davo on July 16, 2012 at 11:19am

Block Buster is still a thing?

Permalink Reply by Mike Schwab on July 16, 2012 at 3:43pm

Small businesses are lucky to offer 10-25% off for sales.

Then groupon comes along, they offer their services or products for half off, and groupon gets half the sale price, so they are getting 25% of the normal price?  That is an awfully quick path to bankruptcy for the business.

Permalink Reply by Leah Jone on August 14, 2012 at 5:18am

My biggest Groupon concern is that they seem to employ 50% or more of the cities actors and improvisers. I'm scared of the day when Groupon starts to contract, starts laying off employees and suddenly Chicago's creatives are all out of work at the same time.

What will happen to theater and comedy in Chicago when they all lose their jobs at Groupon?

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