61–70 of 130 posts
The numbers do not add up. Assuming 1,000 customers; $8,000 in losses is an $8 loss per customer. With $3 of revenue. So they're claiming $11 in variable costs to service each customer, for $13 worth of product. No way that is correct - if it is, Groupon is merely the straw that broke the camel's back. Their markup on product should be way higher. Also, that's assuming no increase in follow on transactions, and that…
How sweet this is for Groupon, they take it all with almost no costs at all...
Groupon CEO re: their cut: “If we were economically rational, we would take even more.” http://venturebeat.com/2010/09/15/demo-the-secret-of-groupon...
I immediately thought of this quote too. I see this as sort of a honeymoon for Groupon while people figure out how it really benefits (or doesn't benefit) their business. Over time their margins will probably drop considerably, so why shouldn't they take what they can get now? I can see how this sucks for small businesses who get flattened by the runaway train, but is it Groupon's responsibility to sabotage their own…
Agreed. I find it striking that most Groupon offers don't really exploit the key feature of the site yet, viz. the "threshold system" which activates the groupon only after a certain number of users have pledged in.
Groupon offers should generally be run by high-margin, capital-intensive businesses offering niche products, not small retail outfits. The OP was a coffee shop, an industry with high variable costs and low margins, so the groupon offer was prima facie inappropriate. But even cafes charge high markups on some niche "premium" products (in order to shift their fixed costs onto a price-insensitive customer base). Instead of targeting the discount on these relatively niche products--thus potentially attracting profitable repeat business--the cafe let the offer bear on their near-commodity offerings: coffee and cookies. How on earth was this a good decision?
One thing the article does not mention is "breakage": "Breakage is a term used in accounting to indicate gift cards that have been sold but never redeemed. Revenue from breakage is almost entirely profit, since companies need not provide any goods or services for unredeemed gift cards." http://en.wikipedia.org/wiki/Breakage This article ( http://www.journalofaccountancy.com/issues/2007/nov/accounti... ) says that the…
i've heard from a few friends in the valley that groupon's avg breakage is in the 30-40% range.
Earlier quoted context omitted.
so, then, would you think that there is a place for a business similar to groupon but focuses more on trying to cut deals that encourages the growth of repeat business and/or good customers?
absolutely. the whole digital promotion space is still ripe. i used to work for the the 3rd largest broadline retailer in the US(SHLD) and we were constantly struggling with this. Think about it, right now if you're Target, how do you push promotions to those who dont already shop at Target? TV is primarily branding, search is primarily for...well specific product search. Nothing out there for true, replacing the old…
In retrospect, I can see it working in a few cases:
1. You are not well known and will attract new customers (marketing expense).
2. The Groupon is worth much less than your typical sale.
3. Your overhead is fixed and you are not at capacity.
A photography deal offered on Groupon in Atlanta yesterday turned messy when it was revealed that the photographer had promoted her work with stolen images and was far from equipped to carry out the terms of the Groupon.
I think this is the best takeaway from the article generally (not focusing on the Groupon aspect).
I see three immediate problems: 1. The merchant didn't think through the consequences of their promotion. They made a deal that was too appealing to an unnecessarily broad swath of potential customers. A commenter on the blog points out that the better approach is to figure out how to bait the hook for a specific type of desirable customer instead of having a fire sale. 2. Groupon didn't look out for their partner me…
Plain and simple: She should have driven a harder bargain or not gone for it. Also #3, #3, #3, and #3. People don't read the little bit on Groupon where it says "tip like you're not getting a discount," or just ignore it, and also #3.
They offered me the same terms when I called them about my retail stores. (want min 50% off for consumer, they take 50% of revenue). I told them it was too rich. They wouldn't budge. I walked away.
They have a 6 month waiting list in some areas, why would they negotiate.
I am amazed that so many businesses accept these terms. There is just no way it makes sense.