The online group buying service launched an Initial Public Offering at Nasdaq on the 4th of November 2011. According to the New York Times, Groupon Inc.’s stock market debut enabled the young company to raise $700 million, making it the largest IPO by an Internet company since Google Inc. raised $1.7 billion in 2004.
The « Groupon » phenomenon
Groupon Inc. is a promotion collective buying website that every day offers internet users several discounts, in the range of 50 to 90% and that can be used in local stores. These discounts are available for different sorts of activities such as spa treatments, restaurant meals, parachute jumps, shows or even “nose jobs”.
If the number of users registering for the offer is high enough, then everyone can benefit from it. If the minimum predetermined number of users is not reached, the “deal of the day” (a phrase that is making its way into the daily vocabulary) is cancelled.
The shops are not seeking to gain a profit, but they use this opportunity as a marketing strategy, hoping new customers will become regular ones, after their attention has been caught by the website. This approach is much cheaper than paying for a standard advertisement, and once the sale takes place, Groupon Inc. has an average commission of 40 to 50%.
A growth without precedent: The fastest in the history
Created in Chicago by Andrew Mason in October 2008, the company started with 120 employees and 4.000 partners. In 2009, the concern progressively spread its services to most of the US towns and made an annual turnover of $23 million. In 2010, Groupon Inc. spread its service network to foreign cities, and since then, more than 115 million people in 50 different countries have registered as customers. The young company turnover has been multiplied by ten during the first semester of 2011, in other words, it has already reached an income of $1.5 billion only within 3 years.
How does the website work?
First of all, there is the registration. The user has to fill out a basic questionnaire the first time he makes use of the website. This allows him to be recognized next time he wants to use it. After agreeing on the “General terms of sales”, he receives a confirmation e-mail, informing him that he has been registered. In other words, from now on he can buy anything he wants on the Groupon website, being informed with several Newsletters.
As soon as the customer is attracted by a deal, he has to identify himself with his e-mail address and his password before being able to order and pay for the product. Once this is done, he will be given two choices regarding the means of payments, either using a credit card or using Paypal. Obviously, every stage of the payment is carried out with a secure internet connection. Finally, he will receive an e-mail, which is his voucher for the purchase.
Assets and Liabilities of that concept
Regarding the website’s quality, it is easy to use and it functions quite well according to the fact that there is no problem with dead links or pictures that do not appear. Furthermore, the Newsletters are personal letters that take into account the customers’ different backgrounds. The main advantage the company has is the variety and the originality of the deals. The company also offers a real, noticeable discount and introduces the customers to a range of different sorts of stores. Additionally, the fast registration and the voucher reception system, the large deadline given to the customers in using it, and the secure internet connection are the reasons why Groupon Inc. has become such a success within such a short period of time.
However, as for the company’s drawbacks, as mentioned earlier if the objective in terms of the number of customers is not reached, the deals are cancelled. Moreover, a number of stores keepers have started to complain about the phenomenon, bringing into light the lack of real benefits on their part, taking into consideration the enormous discounts that Groupon Inc. offer the customers and the commission that they gain from the sales.
Ultimately, it is important to note that the Initial Public Offering environment of the concern has shifted over the past few days due to the stock market volatility and a growing bad reputation. In addition, the company is experiencing a slowing down relating to its expansion, facing a more and more noticeable competition lead by websites such as LivingSocial, Amazon, and Google Inc. According to experts, Groupon Inc.’s immediate and enormous success could be a short-term phenomenon, as the company’s losses have so far amounted to $255 million.
Yvoha DC
It is true that some deal hunters, by their nature, only want great deals and they are going to be less likely to pay the product without discountin the future. However, I am sure that overall, the cooperation between Groupon and the store keepers may be fruitful for both side because otherwise, it is hard to explain how Groupon became the fastest growing company ever.
ReplyDeleteCarine V.
I agree with you Carine, however I keep reading some articles about the growing number of people complaining with respect to the quality of the service. I have to admit that I wanted to use this website in order to find some good deals for Christmas, nervertheless, because of the controversy, I am now hesitating.
ReplyDeleteYvoha DC.