What does Groupon have in common with Tippr, LivingSocial, Amazon Local, TravelZoo, BuyWithMe, Goldstar, and Retrevo? Well, it's the 900-lb gorilla, for one thing; it literally owns the "daily deal" market. This is not a good idea to begin with, but, worse, Groupon seriously thinks of itself as "the operating system of local commerce." (*)
It's not hard to imagine that a website founded on the principle of "lowest possible price" got a foothold in the tough economic times that followed the financial crisis of 2008. (Parenthetical note: Walmart, for years, used "lowest price" as its slogan, but even Walmart has changed. The company now says it helps customers save money so they can "live better.") For a nation of uncertain consumers, in 2008, a "good deal" seemed like something worth seeking out; nobody wants a "bad deal," and nobody wants to spend more than they have to, even if it's just for a hot dog.
Suddenly, daily deals began to flood email inboxes around the country as hapless retailers fell for the argument that the only reason they had empty tables or empty aisles or empty tanning beds was that their prices were too high. Lazik eye surgery? Too expensive. Half off? Well, maybe. (More likely, maybe not.)
Groupon festers, like a tenacious, evil weed. It has survived where others have rotted away or failed completely. Its stock, which flew high in early, post-IPO days, tanked quickly once greedy investors realized that every person in the USA would have to do $1,500 worth of business with Groupon in the course of a lifetime to sustain the company's insane valuation.
Even now, Groupon runs 40,000 deals every day and claims 43 million "subscribers" who delete their annoying emails.
But they're so confident, these SOBs. They've got well over 100 people working in Seattle alone, 11,000 worldwide. They call on merchants and offer the moon: quick cash and the promise of a full house. A horde of cheapskates descends, rides roughshod over the place, tips badly or not at all, and leaves for ever.
Savvy restaurateurs used to stand in front of the door and offer passers by a $20 bill to come in and try the food, and make up their investment on the course of future visits. Now they realize that they lose ten bucks on every Groupon customer but those customers have no incentive to come back because they're only interested in the next deal.
Rather than lose again, those owners should be standing at the door offering the Groupon diner $20 if they don't come in. Cost is the same.
Please don't whine to me about owners being business people with freedom of choice. No one holds a gun to anybody's head in this business. You will never find Terresa Davis of Blueacre Seafood, for example doing a Groupon deal. But she's the exception; she's done the math. She knows there's no magic bullet. But the 40,000 owners who put up deals every day on Groupon? Can they all be suckers in a giant bunco game? Well, yeah.
The sad thing about all this: many of Groupon's own employees have swallowed the party line, too. But it's all Kool-Aid.
Cornichon put up a post about Groupon's alarming business model last year. Read it here.
(*) Geekwire has a more nuanced (and far move favorable) story this morning.
And my good friend Robert Lee has expressed his contrary opinion in a lengthy comment to this Cornichon post about Groupon's influence over the Bite of Seattle. (Click on the "Comments" link below the headline.)
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