Why Groupon will Continue to be a Success

Written by

Image via Wikipedia

There have been so many discussions as of late about Groupon and clones, especially with regards to whether or not Groupon will continue to be a major success. Here are some of the common shots at it:

It’s only an email list
They only do one deal per day per city
Anyone can compete with them
Their 50% fee to businesses isn’t sustainable
People who use it aren’t repeat customers and therefore not profitable customers

Here are reasons why it will continue to be a major success:

Building a critical mass of opt-in email addresses is terribly difficult and expensive, combined with fatigue from people getting emails from too many different competitors
Groupon already announced that they are going to offer multiple deals per city per day targeted against user preferences as well as hyper local deals based on zip codes
Creating a massive sales force to sell to local businesses takes a small fortune, and the only other companies suited to that are existing yellow pages and coupon companies, not low-cost startups
Businesses will always be opening new locations, remodeling existing locations, as well as other types of constant change that will make running a Groupon campaign beneficial to bringing people in the door

What else? Do you think Groupon will continue to be a huge success?

Comments

7 responses to “Why Groupon will Continue to be a Success”

August 29, 2010

Paul Freet

Not a chance! There really is very little barrier to entry. It’s coupons … by email. Sorry, don’t see any staying power here.

Reply
1. August 29, 2010
  
  Denis Baranov
  
  In addition to the low entry barrier, it still takes a lot of resources to build a mailing list of Groupon’s magnitude. The real weaknesses that I see are the waiting list of businesses & the high fee. And these can be exploited easily.
  
  I think, in the end, the national market will be split between Groupon, LivingSocial, and one of the up-and-coming gimmicky players (such as the ones who donate a portion of proceeds). There also can be services dedicated to only particular industries (i.e. outdoor adventures coupons).
  
  Reply
August 29, 2010

Raghu Kakarala

I think they are destined to slower growth, lower margins, and yet still spitting out ridiculous amounts of profit for many years to come.

One issue/opportunity for them is that Groupon becomes harder for smaller businesses to use the bigger the user base becomes, the GAP deal they ran is a precursor to the opposite of personalization, mass numbers of deal takers driven to merchants that can handle mass numbers of people. So Groupon is becoming both more relevant to small hyperlocal businesses through deeper personalization (and smaller total number of deal takers that are manageable to serve by these smaller merchants) and finally becoming quite relevant to mass merchants because of their huge userbase and blasting that deal to the whole list.

Reply
August 29, 2010

Mike Dowdle

Groupon’s reach and relevance is bringing outstanding results to local businesses. A non-profit I am involved with ran a Groupon promotion and doubled their annual membership in one day!

In a low-barrier market, sometimes just getting out front and building your brand faster, out-delivering your competition and continuing to innovate can sustain your lead. They have recruited an incredibly talented team that will only increase the effectiveness of their service through data analytics and becoming even more relevant to advertisers and consumers.

Reply
August 30, 2010

Wayt King

Brand/mindshare. And what Raghu said.

Reply
August 30, 2010

brianhodgson

Yup Overstock.com won’t be a success either…..ooops

Reply
September 1, 2010

Traci

I’m a fan – also a consumer of Groupon deals. While I don’t think that the dining element is sustainable, I do see some legs for higher ticket items, such as laser hair removal. A huge discount on that gets someone in the door – benefits are justified and the savings (plus some) is spent on more procedures. Let’s not forget that the first thing that the receptionists asks you is if you’d like to apply for financing!

Reply