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Player Avatar mshiney77 (98.27) Submitted: 11/19/2013 2:02:34 PM : Underperform Start Price: $9.70 GRPN Score: +41.56

Groupon's business model is great for consumers, but bad for businesses.

When a business signs up, Groupon requires it to offer AT LEAST a 50% discount. Then Groupon takes 50% of each coupon sale. This leaves the business only 25% of their original sales price. Most businesses cannot take massive hits to their margins like that.

Groupon is also incredibly rigid. The terms of the deal cannot change at any point. You cannot change the time period the deal is offered, can't change the terms if there is a mistake, etc. There are various horror stories of people going out of business because there was such tremendous demand for their product/service that they were taking heavy losses from every sale. Groupon would not allow these businesses to take the coupon off their site.

There is also little to no evidence that Groupon is successful at advertising businesses, measured by Groupon buyers visiting the business for the first time that return for a second time without a Groupon deal. This makes the losses most businesses take even more unjustifiable.

I just do not think the Groupon model can last.

Member Avatar brandpoe (< 20) Submitted: 11/21/2013 11:41:04 AM
Recs: 1

I agree that it will be interesting to see if it lasts and how it all pans out, but I just wanted to point out some inaccuracies to stop the spread of wrong information.

http://allthingsd.com/20131120/now-its-groupons-turn-to-look-unoriginal/?mod=obinsite

1). "Groupon requires it to offer AT LEAST a 50% discount." - This is inaccurate and not a pillar in their business model, you can check the site to see this at any time.

2). "Then Groupon takes 50% of each coupon sale." - Also inaccurate, very public knowledge that GRPN has begun to give up it's margin on offers to win new/varying businesses.
Read it here: http://allthingsd.com/20131111/the-risky-groupon-initiative-that-beat-back-livingsocial-perhaps-once-and-for-all/?mod=obinsite

3). This leaves the business only 25% of their original sales price. - See responses 1 and 2. This is the inverse of response 2.

4). "Most businesses cannot take massive hits to their margins like that." - You do not know this, a business that's investing their marketing budget into their supplies/services could easily see the benefits/ROI. It all greatly varies based on the type of business and the negotiations between the business and GRPN.

5). Your entire second paragraph is wrong, have you ever received updates from them about deal terms changing after you've purchased a voucher?

6). Your third paragraph is also completely baseless. This is for the businesses to track on their own and if you check out the GRPN website, there are thousands of success stories from business owners...

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