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Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

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Re: Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

#61

Post by erikpukinskis »

jamiequint wrote: post #18
melvinram wrote: post #15

Earlier quoted context omitted.

I think the piece of the puzzle that most people have trouble with is not that they'll have repeat customers. It's that those customers are loyal to Groupon... or more specifically, loyal to the concept of deep discounts. The part most people, including myself, have a hard time grok'ing is that merchants will continue to punish themselves by doing business with Groupon.

Exactly this. I'd be very interested in a stat of how many of Groupon's merchants are operating these deals at a profit. I know one SF merchant personally that does, but I suspect its very few. Even more importantly, I'd be interested in how many of these Groupon customers are returning to the merchant. If that number is high than Groupon has hope, if its low then they aren't actually adding much value and they can o…

I think a lot of it is profitable for merchants these days. Invariably when I peek at Groupon, the deal falls into the category of "useless shit that is insanely overpriced normally, and with the deal is just reasonably priced useless shit".

Re: Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

#62

Post by sorbus »

Steko wrote: post #57
sorbus wrote: post #55

Earlier quoted context omitted.

> Scale allows them to offer better deals -- if Groupon can generate 1,000 takers for a Dreamdu5t Cafe coupon and Google Offers can only come up with 200 then Groupon can drastically undercut whatever margin Google is taking and win your sale. If customers who arrive at a store through Google Offers are more likely to return to the store in the future without a coupon than customers who arrive at a store through Grou…

Groupon and Living Social and Google and Facebook are all trying to convert Jane Doe to their subscriber. I find it extremely questionable that Jane Doe is going to be much more likely to come back to Sorbus Spa whether she bought her coupon at one service or the other. Ultimately the client is responsible for delivering goods and services that merit repeat business. Who does the client go with? Much like with any ot…

I was suggesting the possibility of different coupon services marketing themselves to different segments of the populace; the most common characterization (as far as I can tell) of people who use Groupon is as cheap or stingy, so a service which was able to promote a view of its subscribers as more affluent or using the coupons as a low-risk way of trying something (as opposed to just shopping for deals) would be better placed to market to businesses.

However, you're completely right that clients would go with whichever service offers the best value and best range of coupons, and that scale offers an advantage there. I would add that it is highly unlikely that subscribers would only subscribe to a single service. With the marginal cost of subscribing being so low (just signing up with an email and then looking at the deals when they show up, as I understand it), the increased variety of coupons would almost certainly sway the majority of subscribers. At that point, it would become a fight over which service can find businesses offering the cheapest or most desirable deal, in which scale gives the advantage.

Re: Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

#63

Post by Steko »

sorbus wrote: post #62
Steko wrote: post #57

Earlier quoted context omitted.

Groupon and Living Social and Google and Facebook are all trying to convert Jane Doe to their subscriber. I find it extremely questionable that Jane Doe is going to be much more likely to come back to Sorbus Spa whether she bought her coupon at one service or the other. Ultimately the client is responsible for delivering goods and services that merit repeat business. Who does the client go with? Much like with any ot…

I was suggesting the possibility of different coupon services marketing themselves to different segments of the populace; the most common characterization (as far as I can tell) of people who use Groupon is as cheap or stingy, so a service which was able to promote a view of its subscribers as more affluent or using the coupons as a low-risk way of trying something (as opposed to just shopping for deals) would be bet…

That's a great point, these competing services can try to go after say a higher end part of the market or underserved demographic.

Re: Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

#64

Post by michaelpinto »

Yes Amazon turned out to be real, but Pets.com, Kozmo.com, Webvan, Flooz, eToys, Boo.com and the theGlobe.com weren't real. My guess is that there will be some winners from the graduating class of Web 2.0 — but there will be bodies. By the way if you ant to see a great film on that era check out Startup.com: http://www.imdb.com/title/tt0256408/

Re: Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

#65

Post by DaveMebs »

robertp wrote: post #48
mattmanser wrote: post #17

Earlier quoted context omitted.

I think that perhaps you're not grokking Groupon, the customers of Groupon have never been the bargain hunters, they've always been the merchants. The bargain hunters are the product Groupon sells. You can then look at the model and realize Groupon have been screwing their own customers. It's a shame as I think the core concept of the business is pretty sound in my book, but I was astounded when I found out the Group…

It is the other way around. My friend has a wine store and he was an early adopter of groupon. I think he started almost 2 years ago? He stopped doing it because it brought in riff raff customers that were cheap and were pretty much broke.

No, he got it right. His point was that Groupons customers are merchants, and they have been screwing their customers. Excluding the first sentence, your point completely validates what he was trying to say.

Re: Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

#66

Post by DaveMebs »

shantanubala wrote: post #47
twakefield wrote: post #44

Earlier quoted context omitted.

"I'd be very interested in a stat of how many of Groupon's merchants are operating these deals at a profit." Isn't the point that it brings customers in the door albeit at a loss? Hopefully, the future value of the customer is more than the loss on the initial deal. I think that's what your getting at with your subsequent sentences. I am not in the retail business so this is just conjecture but it seems to me that it…

Yeah -- it's a really bad setup in the end though because Groupon attracts the type of customer that isn't likely to spend a lot of money in the first place unless there is a deal. In other words, Groupon can attract a lot of customers, but the quality of those customers isn't very good (at least from my personal experience, all of the people I know who heavily use Groupon don't really use it at places they haven't a…

I think it depends on the kind of business. I think it is useful to break Groupon deals into a few categories, as well as the number of customers involved in any given deal:

FAST-FOOD DINING Depending on the number of customers. most, if not all, fast-food restaurants will probably be able to make a profit of a 50% deal. These businesses thrive on large numbers of customers, and their profits scale extremely well. It is also relatively easy to win over new customers if you are more convenient, providing a reasonable opportunity to gain repeat customers (ex: Dominos does a deal and people find it delicious and cheap).

SIT-DOWN DINING This is a much harder category to map a profit on a Groupon deal. These restaurants have a much more rigid number of customers they can serve on any given night. For a popular restaurant there is to use Groupon as they can already fill the seats and it is not a good value for them. For unpopular restaurants, people will attend but it seems unlikely these will be repeat customers. They are already bargain hunters, and it will be hard to wow these customers enough to return to your restaurant repeatedly.

ONE TIME USE ACTIVITIES These deals have a similar problem to the sit-down restaurant. These are fun the first time, but repeat visits are much less compelling and it will be challenging to permanently pique the interest of bargain hunters. (ex: Deal on a boat tour)

REPEAT USE ACTIVITIES Repeat activities seem like a reasonable set market for Groupon. These activities suffer from the same fixed-sized problem, however they stand a reasonable chance of retaining customers. Deals such as training and introductory courses are explicitly designed to attract new customers, and a Groupon top get them in the door seems fairly reasonable.

No matter what activity the Groupon is for, the number of customers who take advantage of the deal is a key component. Economy of scale is true for every business, and the more customers who take advantage of any given deal will directly affect the profit in involved with any given transaction

Re: Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

#67

Post by flomo »

dlevine wrote: post #8

I actually though about Amazon when I saw people starting to rag on Groupon and its bottom line. Another important thing to remember is that Amazon actually figured out its business model later. For a while, it was pretty much just a dot-com that was hemorrhaging cash. I remember reading articles for years predicting that Amazon would go belly up any day. It wasn't until they cut costs and really dialed in their oper…

Disagree - the catalog business model was a proven quantity going back a century or more, e.g. Sears. Amazon was the first mover and was focused on building footprint pretty much from the beginning. Despite this critical article, a more accurate survey of that era's business press would give the impression that Amazon.com was the "good one" compared to the Outpost.com like pump-n-dumps that were often nothing more than a few webservers. Maybe Amazon didn't get serious until the lean times, but the press hype was generally correct.

On the other hand, the Groupon business model has always been borderline. (I remember my parents buying these coupon books with deals like half-off steak dinner on Tuesdays before 8PM. How many of those companies are still around?) Furthermore, its been tried before on the Internet, although never at this scale. Nobody's quite said it, but it really does seem like the underlying idea is "Facebook has created The New Economy! What possibly could go wrong?"

Re: Amazon: Ponzi Scheme or Wal-Mart of the Web? (2000)

#69

Post by syllogism »

nhebb wrote: post #22

Timely, since Groupon competitor LivingSocial is heavily backed by Amazon. Amazon invested in their infrastructure, whereas Groupon lined their pockets. Theres is no real comparison between the two, other than the article's title. A few weeks ago LivingSocial publicly predicted that they'd surpass Groupon by January 2012. They're currently in ~40% of the markets that Groupon reaches and have ~40% of the revenue, so t…

That interview with the LivingSocial CEO[1] was excellent. I think their idea of the local restaurant marketplace will do very well. That idea really makes sense to me, in a way that groupon doesn't.

[1] http://www.businessinsider.com/livingsocial-tim-oshaughnessy...

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