Why are Groupon's sales crashing?
After two years of meteoric performance, its daily deals seem to be losing the attention of bargain hunters. What could be going wrong?
This post comes from Lynn Mucken at MSN Money.
What's gone wrong with Groupon? Just a few months ago, the online daily deal deliverer peddled 411,000 $50-for-$25 coupons for Gap in just one day. More recently, the two-year-old company rejected a $6 billion purchase offer from Google.
Now the numbers look a lot different. Groupon's U.S. revenue fell 30% in February from a month earlier. This week, Yipit, a daily deal aggregator that indexes more than 400 services, reported that Groupon sales are down another 32% in March.
Surely, the world cannot be tiring of getting $40 worth of restaurant chow -- sorry, fine dining -- for $20. Or could it? Post continues after video.
Maybe we have just figured it out:
- False economics: You are spending, but not necessarily saving. If you were planning on going school-clothes shopping at a specific store anyway, Groupon definitely is a good deal. Jumping in and "saving 64%" on pole-dancing lessons -- I'm not making this up; it was in my mailbox yesterday -- means you are spending $25, not saving $45.
- The "gotcha": A few years ago my wife and I successfully bid $50 at a school auction for a $125 coupon to a well-known upscale restaurant. After dinner, drinks, taxes and tip, we still got a bill for $125. Oh, I forgot the valet parking. And do you really think you can take your teenager into Gap and hold spending to $50? This is why companies offer these deals.
- It's impulse buying: Groupon has it all figured out: Buy now (or at least by midnight) or it's gone forever; get some for a friend; save, save and save. We are just low-hanging fruit, and eventually we realize it.
- Buyer's remorse: The excitement is gone and now you're left with the coupon for something that doesn't seem like such a good idea (pole dancing?). You have options, however. You can eat the coupon; industry experts estimate 15% to 20% of coupons go unredeemed. Or you can go to a secondary market such as Lifesta, where you can sell off your mistakes -- or buy others'. The charge, to the seller, is 99 cents, plus 8% of the selling price. See "Useless Groupon? Cash it in" for more markets.
- Oh, the clutter!: Groupon is not alone in offering you deals. Copycats have proliferated: LivingSocial, BuyWithMe, Rue La La, ideeli, Beyond the Rack, Swirl, HauteLook, DailyCandy, Thrillist, UrbanDaddy, Glit Groupe, Travelzoo, OpenTable. Like the bag on the vacuum cleaner, the mind eventually fills up and shuts down.
- It's no longer shiny new: Americans get tired of even the most-enthralling things; remember Paris Hilton (I actually had to go to Bing to look up her first name)?
But the geniuses at Groupon will cope. Time.com reports there soon will be a Groupon Now, which just might flash you alerts on "immediate" deals such as half-price food at the Chinese buffet if you eat within two hours.
More from MSN Money:
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They should have taken the $6 billion when they had the chance. Dumb. Dumb. Dumb.
The other thing is that for some deals you won't pay the MSRP even on a regular day. For a recent deal on a Bed&Breakfast I went to the place's website and checked the room rates. The deal was for about 10% off - nowehere near the 50% claimed.
What an irresponsible idiot you are higher gas prices only help big Oil,
The real deal is put them out of business. Figure it out.com
As per usual with these deals, what you "save" ends up being what you end up paying for the tip.
Last week they offered the same for $3, and $4.50 for Shula's, but I held off until I use up the other 5 certs I bought from the first round. No sense going too nutso.
Groupon being Chicago-based, I am rooting for them, but folks will go where the best deals are. And with lots of competition around, Groupon will have to innovate and offer something really special in order to dominate.
Ever heard of the Hoola Hoop, or Betamax video tape movies?
Groupon is a fad folks, plain and simple.
Without investment capital they would owe millions.
They are BROKE, and coasting on speculation money.
Who has money to be spending on the crap they are hawking in this economy anyway.
Google could absorb the losses and keep on kicking like When CarMax was propped up by Circuit city and lost, and lost and lost - Now all that is left is CarMax as CC is dead.
Carmax will be next.
Conversely- By the way - Your 350,000.00 house that they say is now worth 200,000.00 is still worth about 325-350,000.00 90% of the time.
Just try to build it from materials from the open market for 200K, yeah, like that is going to happen.
Housing is the reverse of the value trend- Try to hang in there till after the vultures pick the bones clean, your house has true value - and so does the good ol US 0f A - don't let anyone tell you or sell you on otherwise.
Check out China and India if you want to see the REAL housing bubbles.
Groupon has a negative True value.
Oh, and Oil - No way worth more than 80.00 a barrell, no way, now how - It is a scam.
Stop driving when you don't have to and let them eat the 120.00 a barrell oil, and don't aid and abet this Groupon BS along with all the other scams out there.
My 2 pennys.
If the offer sucks or is for some small business in some obscure part of town... people don't get too excited.
Maybe they are not landing good enough deals lately. It could all come down to declining ROI for the advertisers or an unwillingness to take a chance with loyalty building discount advertising.
chris your an idiot, glorified spammer? I thought the premise was pretty simple even for someone dumb? groupon hasnt really lost anything, ALL companies start real strong out the gate then faulter a little, bottom line, they still offer great deals, and they are still a profitable company
END OF STORY.
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Homeowners associations ban them and environmentalists love them. All that aside, though, a clothesline saves you money.
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