Groupon is going down

I can write an essay on this topic, but I will keep it simple.

End-Users

This is great for customers, we get stuff for cheap. The more Groupon like sites there are, the more money we save. The only down side is, the Web is getting flooded with group purchasing and not all of them are good deal.

Businesses

Group purchasing is double edge sword. Here are couple things to think about if you are thinking about using Groupon to sell your products.

Investores

STAY AWAY

Groupon tried to go IPO but couldn’t due to messy issues. Recently CEO even created video asking investors to invest, I saw desperation in this eyes. Group purchasing is not an investment worthy business. It is only a online version of Costco. So why is Costco worth investing(not that I would) and not Group purchasing sites? It has very low barrier to entry. Anybody can create a website like groupon, go around stores to get a deal and start.

Groupon’s finance also proves how simple their business is. Their revenue has been going up strong, but their net profit did’t follow the trend. Their revenue went up because they hired lots of sales people to go around and make deals with product/service providers.

The biggest problem with Groupon is, not every business can benefit from Groupon, and yet they make empty promises. I hate sales man who will do anything to make a sale. Businesses who used Groupon’s services have mix opinions. And as you can guess, there are lots of unhappy businesses.

Currently, only way for investors to get their money return is to go IPO. Even if they go IPO, I am guessing the group purchasing bubble will pop in a year or two.

Conclusion

I like putting money where my mouth is, if I can bet against Groupon, I would. I am not saying all Group purchasing is bad, but Groupn’s case is the perfect bad example. If you are online business, you need to set the barrier to entry high and differentiate from others. Next time I will write, how I would do group purchasing if I am starting one.