Thursday, August 18, 2011

Groupon makes me tired

I read a blog post a while back comparing groupon to a ponzi scheme, but I think it's more accurately Tulip Mania.

I discount the value Groupon can have for a business who is missing traffic to their store and struggling to figure out how a business gets a loyal customer from this tactic. As a business, it seems to me Groupon will only create disloyal customers and as a business, the best I can hope for from is a sort of ebay-like place to either dump excess inventory or fill in slow periods where I have trouble getting customers into my place of business.

When looking at the fundamentals, Groupon has only overhead. The only arguable asset is their consumer base and I think it provides no intrinsic value as these customers represent a pool of people who will buy something for 50% or more off. I hate to break the bad news, but those people aren't hard to find. Worse yet, the switching cost from groupon to "whatever else" is almost zero.

For Groupon to survive, they need to figure out how to make both their consumers and their business customers "sticky".

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