January 21, 2011 

Groupon’s Imminent Mediocrity

I like groupon, quite a bit in fact. I use it a couple times a month. It has some great deals.

The problem is I also use LivingSocial. And I use Denver Daily Deals. And I’ll likely have no problem using the forthcoming Google Offers.

And that’s why Groupon is screwed. The simplicity that makes these daily deals sites so great (I bought $80 of wine for $40 on a chair lift while snowboarding, WE LIVE IN THE FUTURE) also homogenizes them.

Daily deals websites aren’t like others on the interenet. You’re not using their service because you NEED it. Or because it does something others don’t.  Nor are you signing up for them because your internet social circle exists there. You’re just trying to score some sweet deals on cool stuff.

When each deals site offers the same stuff and provides a half-decent user experience, there’s no reason for customer loyalty to one as opposed to another.

Groupon did it first. I think (right now) they’re doing it best. I think the success they’re enjoying is deserved. However, it’s fleeting. Other deals sites will grow, Groupon’s momentum will slow, and in 3 years they’ll be out of business or wishing they’d accepted Google’s $6 billion. Or both.

Tags: , , , , , , ,

More from this category

  • Thor

    Furthermore, I think few people have looked at the sustainability of the Groupon model through the eyes of the vendor. Visited a full restaurant on a Saturday night and talked with the proprietor. He cursed Groupon saying he hoped he could get repeat customers but that he received half of the coupon price and lost probably $80 on our table of six (where there were two groupon certificates). Strong restaurants won’t give up that profitability. Weak restaurants can’t afford to go empty and so hope to make up for profitless conditions on volume. Fat chance. So, as the economy recovers and imitators multiply, the next line of defense will be on how much of a certificate should be rebated to the business because at 10% reported margins, they can’t cut prices. Not much margin for error, in my opinion.