Article: Why Groupon Is Poised For Collapse

The excerpts below appeared in an article on TechCrunch about Groupon.  I’m not a big fan of huge discounts for daily deals and I believe that merchants should be careful about them…

Groupon is not an Internet marketing business so much as it is the equivalent of a loan sharking business…Groupon is essentially a very, very expensive loan.  They get the cash up front, but pay for it with deep discounts over time.

In many cases, running a Groupon can be a terrible financial decision for merchants. Groupon’s financials also raise questions about its ongoing viability.

Groupon can clearly deliver customers. But in order to know if it makes financial sense as a customer acquisition tool, merchants need to know …the proportion of Groupon customers who are already their customers (and)…how often new customers come back.

The higher the first number, the worse their deal will perform. The higher the second number, the better their deal does.

But for most businesses, these critical numbers are impossible to know. Groupons haven’t been out long enough to generate this data.  And Groupon’s tracking methods aren’t collecting this data. (My intuition is that Groupon doesn’t want to know.)

Groupon touts a win-win proposition. But the reality is that Groupon usually wins and merchants usually lose…

Read the story… | Source: TechCrunch | Date posted: 6/15/2011

About Joe Martinico

Joe Martinico coaches entrepreneurs in sales and online marketing.
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