www.watoday.com.au/technology/the-thrilling-demise-of-groupon-20120817-24dlq.html
(It's Phil) and no sarcasm here I am genuinely interested in business topics that affect small business. I always thought about these companies that surely they would just encourage somebody to set up a front business, take the first payment or 2 then disappear.
I do love how quickly things change in this digital age.
Very interesting, I have often seen these deals and wondered how such a thing could ever be viable for a business. For example I've seen scuba certs. being advertised for $150 - I know that registration alone is $99 per diver, add on top of that course materials and instruction and it just doesn't make sense.
Surely the only attraction is if there is a sufficiently high non redemption rate?
One motivation is to just work for free and see it as advertising, i.e. you are improving your customer base with potential customers you may never have met otherwise, just like $1 flights. You can weigh it up against say magazine or radio advertising which when you think about it is just giving your money away in the hope of new customers.
The non redemptions usually go to the company such as 'Living Social' but as their market has become more competitive most business owners can negotiate this to go to them. This kinda defeats the whole purpose of trying to expand your customer base however and turns it into a tax on impulsive lazy people.
So in a very, very, short amount of time, these guys no longer have product to sell. Bet they wish they took the $6 Billion!
Absolutely and I'd imagine its really good for something like a bus company or if you owned a ferry where you can fill up the empty seats. Also a real winner for keen, young start-ups, who don't have a customer base. The interesting thing here is that it is not working for Groupon themselves, and they don't even have to provide the product.
My business sells electronic goods. It is well established and has been retailing goods for 15 years now. My market is super competitive so I decided to give them a go. Whilst it did generate incremental sales, it came with a whole host of new problems. The average failure rate in my business is about 0.05%. These customers had a failure rate of 3.8%..... WTF... They were constantly demanding services and accessories at heavily discounted prices. They were very difficult to please and are still a pain in the a#* to be honest. I don't think any of these customers will ever end up being a loyal customer, and we are talking north of 1500 of them. They took almost 50% of the very small margin I made and then it took me 2 months to get my money. Not worth the effort with the type of customer they deliver.
Hey Guys,
We wondered how any kite school could make any headway with the Groupon and other deals. We got harassed by so many of them for a year or so. Told them all to GFT.
Glad we did.
DM
Yeah, I suppose repeat business could have some sense to it. There have been a few scams I've heard about.
As for groupon and co. low fixed cost of setting up, broad reach - textbook opportunity for market entry and profit dissolution.
