Groupon Buys LivingSocial, a Rival Once Valued at $6B

Post by wazungu » Thu, Oct 27, 2016, 1:58 AM UTC

reverend_gonzo wrote: post #39

roel_v wrote: post #33

Earlier quoted context omitted.

"(the people who tend to use Groupon the most)" Maybe it's more accurate to say 'the people who easily fell for Groupon's sales people'. In my area the various daily deal sites have very aggressive sales fleets, who literally go door to door in shopping streets convincing owners to put up a deal. Many of them lose money or barely break even; but then again some of them owe it to themselves (I bought a deal once and w…

I think it's also important to keep in mind when Groupon was founded and started getting big: 2008. Everybody was suffering and cutting costs. I don't think it was so much as wanting to be price savvy, but rather, wanting to go out and not being able to afford it. Groupon actually stemmed from a different startup that was supposed to be about something like community building. (The name alludes me, but I used to work…

Post by toomanybeersies » Thu, Oct 27, 2016, 2:15 AM UTC

twblalock wrote: post #35

downandout wrote: post #22

Earlier quoted context omitted.

I'm curious how you could possibly lose money in a business like this. Sure there is a sales cost, but there are alternatives to having a full-time sales force. I'd have tracked every company that has used Groupon/LivingSocial and figured out a way to electronically contact or advertise to as many of them as possible for very little cost (LinkedIn/Facebook enable advertising to employees at specific companies, for ex…

Dealing with small businesses is a total pain. Dealing with thousands of them is a major challenge for any business. Many small businesses don't adhere to professional norms of communication, negotiation, payment, etc -- that's not a big surprise, considering that many of them are owned by people without a lot of background in big business. The amount of time put into each deal is very high compared to the money you…

Post by davemel37 » Thu, Oct 27, 2016, 2:35 AM UTC

CPLX wrote: post #23

jamestnz wrote: post #20

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I agree, it's probably a terrible deal for almost every retailer, especially small businesses. As I recall, the standard deal with Groupon etc is 50% off retail price, then Groupon (or whoever) takes 50% of what's left. So consider a product or service you usually sell for $100, which costs you $40 to deliver. When doing one of these deals, you're now selling it for $50. You get $25 of that, and the platform operator…

You've just described the main dynamics involved, with one key part left out. The vendor would realize the revenue up front, when all the "coupons" would be sold. Then they would fulfill the orders over a period of weeks or months, with some sort of breakage rate involved. Needless to say that put the incentives of the buyers and sellers in tension. But overall the main model was not really just a simple loss-leader…

Post by davemel37 » Thu, Oct 27, 2016, 2:36 AM UTC

wutbrodo wrote: post #34

icebraining wrote: post #26

Earlier quoted context omitted.

It can still make sense if you have low marginal vs fixed costs. I know restaurants that are happy to use them to fill up time slots when they're usually empty¹. Since most of their costs are fixed (rent, salaries, etc), they still make a profit at the margin. ¹ I don't know about Groupon, but other deal sites allow them to put certain conditions on the use of the voucher

This is particularly true for businesses that offer things like yoga classes, for whom the marginal cost is ~0. This is obvious to everyone now, but early on most small businesses didn't think of Groupon as what it is: a form of marketing that requires a fairly particular cost structure to be cost-effective.

Post by unclebucknasty » Thu, Oct 27, 2016, 2:55 AM UTC

downandout wrote: post #22

dmerrick wrote: post #17

Back in 2010 I worked at a startup that ended up pivoting to a regional Groupon clone. It seemed like a good idea at the time, but the company ended up going under a year later. What I remember most vividly was trying to come up with a good name. LivingSocial was starting to get traction and we wanted to differentiate ourselves from them. The conversation went like: Boss: What's the opposite of LivingSocial? Me: I du…

I'm curious how you could possibly lose money in a business like this. Sure there is a sales cost, but there are alternatives to having a full-time sales force. I'd have tracked every company that has used Groupon/LivingSocial and figured out a way to electronically contact or advertise to as many of them as possible for very little cost (LinkedIn/Facebook enable advertising to employees at specific companies, for ex…