71–80 of 130 posts
Great quote from the article: "When you buy something cheap and bad, the best you’re going to feel about it is when you buy it. When you buy something expensive and good, the worst you’re going to feel about it is when you buy it." Of couse, this assumes that you can afford it at all. But largely accurate if so, IMO.
Earlier quoted context omitted.
Both of your statements are based on equivalency between marginal cost and average cost. The marginal profit in the service industry is not less than 10%. It would be nearly impossible to pay for all the fixed costs of running a service company (rent, labor, depreciation of PP&E) if that were true. Yes, the net profit margin is less than 10% (typically 5-7% for restaurants). The two are not the same. Many gross margi…
If you are losing money on each transaction, you can't make it up in volume, you can only lose money faster. Your gross margin would have to be 75% to make money with a groupon promotion, without accounting for any of your fixed costs. The only thing that might be able to touch that is some alcohol sales, assuming you could control employee theft and shrinkage, which you can't. Let us also not forget that a restauran…
The only thing that might be able to touch that
is some alcohol sales
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…
Agreed. She should have constrained what it could be applied to so she could manage her losses. If I was going to embark on a Groupon campaign, I'd want to look at how much money I would lose per Groupon and then figure out how many Groupons I could afford to sell. If you just open the floodgates without calculating how much you can afford to lose, it's not Groupons fault, it's your own. Even a layman should be able…
I'm surprised Groupon doesn't do this. Or do they and this business just didn't set a limit?
Completely wrong. Just because Groupon doesn't have any variable cost doesn't mean all of their revenue is profit. Credit card processing, bank fees, and chargebacks will eat up 2-5% of the (gross) revenue, and Groupon spends much more than that buying clicks to drive traffic to the merchant's deal.
Great quote from the article: "When you buy something cheap and bad, the best you’re going to feel about it is when you buy it. When you buy something expensive and good, the worst you’re going to feel about it is when you buy it." Of couse, this assumes that you can afford it at all. But largely accurate if so, IMO.
This also assumes that expensive == good. In my experience, that's not always true, or even often true. Then you feel really bad.
Earlier quoted context omitted.
Agreed. She should have constrained what it could be applied to so she could manage her losses. If I was going to embark on a Groupon campaign, I'd want to look at how much money I would lose per Groupon and then figure out how many Groupons I could afford to sell. If you just open the floodgates without calculating how much you can afford to lose, it's not Groupons fault, it's your own. Even a layman should be able…
Angie's List (my company) has created a similar group coupon system (The Big Deal) as Groupon, but targeted to a more niche market. We actually allow companies to set a hard limit on the number of coupons that can get sold. This allows businesses to offer really great deals that they expect may do negative revenue just to bring in new customers, but control the loss with the limit. I'm surprised Groupon doesn't do th…
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…
Who is GlennKelman and why is he/shey only submitting redfin articles and who are redfin and why are the articles deliberately contrarian and who is upvoting them?
That's not hard to find out. Glenn Kelman is the CEO of redfin, which has a very cool Google Maps-like real estate search. I haven't done business with them, but have used them as another tool during my house-buying searches. I wager that Glenn (or someone on the redfin team) is using HackerNews as yet another place to market. Personally, I don't mind. It's interesting reading.
Who is GlennKelman and why is he/shey only submitting redfin articles and who are redfin and why are the articles deliberately contrarian and who is upvoting them?
I'm OK with redfin submitting their own post as I found this particular entry to be interesting, and thought provoking.
Who is GlennKelman and why is he/shey only submitting redfin articles and who are redfin and why are the articles deliberately contrarian and who is upvoting them?
CEO of Redfin: http://www.redfin.com/about/management In his defense, they have been two good articles so far.