Groupon Review – Is it Here to Stay?

With group buying being the next big thing, I thought it would be a good time to talk a little bit about one of the more well known companies in this space called Groupon.  Another reason is that here in NL, the market is small, and Groupon is the only company who is locally on the ground.

Group buying isn’t a new concept, but is something that has only been brought into the mainstream in recent history.  As someone who thoroughly enjoys obtaining a good deal, the concept of getting local deals at 50% off (or more) is enough for me to willingly open my wallet.

About Group Buying

Groupon, like others in the space, all have a very similar business model, but Groupon is the largest of the group.  Their model is to create deals with local businesses for local residents.  For example, Groupon would approach a local popular restaurant, and negotiate a 50% off coupon (eg. $30 off $60 meal) in exchange for attracting a required number of local customers.  Groupon would in turn offer the 50% off coupon for their members and collect a share of the revenues.

When I first heard of this model, my first thought was that the business would be losing money so why would they do it?  They are likely losing, but in reality, it’s a pretty cheap form of advertising and it’s bringing people in the door which is quantifiable.   So it’s a win-win-win situation, the business may reach out to new customers, the customer gets a deal, and Groupon generates revenue from every transaction.

Groupon Valuation and IPO

It appears that the group buying business can be very lucrative!  It’s rumoured that Groupon (and others) collect up to 50% of each deal.  So if, for example, a restaurant offers $60 meals for $30 and sells 1000 coupons, that would be $30,000 in total revenue.  As these deals typically run for 24 hours, that’s $15,000 for Groupon and $15,000 to the restaurant in one day!  Combined with multiple deals, multiple cities and countries, it can lead to some serious numbers.

Groupon is doing so well in fact, that they plan on doing an IPO later this year.  If you’ve been following the tech news, you may have heard that Google offered Groupon $6 Billion to take over the company.  With apparent $800M in  revenue, that’s an offer of  7.5 times sales.  It appears that Groupon is profitable, but earnings have not been announced.  While I thought that was a rich offer, Groupon turned it down!  But now we know why, they plan on doing a $15 Billion Groupon IPO relatively soon.  Unless their earnings can backup that valuation, it’s unlikely that I’ll be adding Groupon to my RRSP.

My Experience with Groupon

Now I can’t write about my group buying without trying it out myself.  Groupon has an easy interface and an even easier registration system (name, email, password) which is common in social media type sites these days.  A few days after signing up, I received an email about a deal with a local specialty grocery store that I’ve been meaning to try out.  The deal was $20 for $40 worth of groceries, and as we’re going to spend money on groceries regardless, I thought it was the perfect opportunity to give the store a visit.

After paying online for the deal, I received an email shortly after that included the coupon to be printed off.   If you’re anything like me, you may be thinking how a store like that tracks these coupons and how do they prevent fraud?  Anyone can generate a similar coupon with basic wordpressing software. The answer came when I used the coupon in store.  For this particular store, they had a printed folder that included every coupon purchased, the coupon number along with name of the Groupon member.

Overall, I was very pleased with my experience and will continue to watch out for local deals of interest.

Competition?

As I mentioned, there are a growing number of sites that offer the same group buying opportunity.  Which ones have you tried?  Which ones do you like best?  The market locally is pretty small so I don’t expect too many other sites to join Groupon in NL.

Disclaimer:  There are referral links in this post.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Francine Carstensen
9 years ago

I had a terrible experience with Groupon. Received Groupon as a gift (Note this is like having a gift card with a value associated with your name on the gift) Groupon records this transaction and for the associated “deal” so they know how much the valuation was for and who the gift was purchased for.

If the company offering the service through the Groupon does not honor it within the time allotted. Groupon’s Customer Service team refuses to either intercede on your behalf, nor will they offer you credit towards another groupon.

Hence – tbey keep all the money and there is no recourse.

The “Groupon Promise” is a crock. Save your money. Or, DON”T give Groupon as a gift unless you really dislike the person you are giving it to, and just want Groupon to keep your money.

Ella
9 years ago

I have a bad esperience with groupon restaurant deals in my area. After being very diappointed twice I now don’t buy groupon restaurant deals anymore…

RG
10 years ago

NOT if they don’t pay attention to the service provided by the suppliers.
NOT if they don’t start enforcing SLA’s on supliers….

I have bought ample of Groupon deals. It used to be very good at the beggining and was good value for money. However, after it became popular, the service has gone downhill. Specially the Spa deals are a big NO-NO. It is almost impossible to get an appoinment. I have been calling Chelsea Spa to get an appointment for 2 months now and it always goes on voicemail. When I emailed their customer service, they said I have to keep trying. Now they have even stopped responding to my emails. So I am stuck with this Groupon deal!
I have had similar experience with O Spa deals on Groupon.
For one other Spa deal, I got an appointment date of 3 months later, even though I called within 48 hrs of purchasing the deal.
I think it’s time Groupon considered quality of service provided by the suppliers. It’ll not be long before customers will stop buying because of the pathetic service. I have already stopped buying any Spa deals.

Katy
10 years ago

I love Groupon and their recent introduction of Groupon Now, so convenient. I personally think the business model will last for a while as long as the quality of the vendors remain good and trustworthy.

In addition to Michelle’s suggestion, I use http://www.dealsnapshot.com/, which is a deal aggregator website that helps me keep track of all the ongoing deals including Groupon, LivingSocial, Dealfind, etc.

Michelle
10 years ago

For the group deal fans, http://www.dealbriefing.com combines links to all the Groupon type sites so I didn’t have to subscribe to every site or check them all separately. Love love love the convenience!

Jane Sanders
10 years ago

I absolutely love Groupon! I just hope I don’t end up overbuying just because I can’t pass up some seemingly good deals.

SavingMentor
10 years ago

@youngandthrifty for Groupon it isn’t even close to $10 unless the Groupon is quite expensive and that’s only for first time purchasers. After that it drops by 80% for repeat purchasers.

@Scott
I don’t have a problem with bloggers making money off a product that is beneficial to the people they are recommending it to as long as they actually believe in it or are at least honestly reviewing it.

Producing all this quality content takes endless hours of work and some compensation (often not enough) through advertising and affiliate links is acceptable in my opinion. Supporting your favourite blogger by clicking their links and interacting with their advertisers is a good thing so they can afford to spend more time writing quality content!

I felt that way long before I started writing content myself. Having a disclaimer is a good thing though and I will be putting one up myself soon.

youngandthrifty
10 years ago

@Scott- I think the referral fees that a blogger gets through an affiliate link are similar to ones you would get were you refer a friend via email or facebook.

I believe its $10 of groupon credit.

So you could technically get all your friends to subscribe to groupon and you would make money from being an affiliate too.

youngandthrifty
10 years ago

I did a monster post on my blog about Groupon a few months ago and was pretty late on the band wagon (all my friends were talking about Groupon).

I have become a groupon addict and do find the multiple daily emails annoying, but do often find some gems in there. The key is to use them before the expiry date!

I have limited myself to a groupon ban (lol) until I free up the “queue” of groupons I have yet to use. My most recent Groupon purchase was $50 worth of American Apparel clothes for $25.

In Vancouver, we have the whole shebang (wag jag, living social, groupon, etc. etc.) which can be overwhelming. I have since unsubscribed to the smaller companies (often they don’t offer great deals anyways).

Scott
10 years ago

These referral reviews are a waste and misleading. I dislike the biased reporting and certainly think less of this blog when I read them. What sort of kick back does group on give you for signing up readers anyways?