Do you remember your first Groupon? The question is a pertinent one, because we’ve just learned that it might be your last. Groupon South Africa is being taken out the back today, and I for one will be dancing on its grave.
I’m not saying I don’t like a bargain – I love saving money as much as the next reasonable person. I’m not an obsessive coupon clipper, but I’m careful with the weekly shop and so on. And the promise of Groupon was great – it goes out and uses its big multi-national marketing muscle to negotiate outrageously good bargains, then resell them to their users. You get a bargain, someone gets more customers and Groupon gets a cut.
Everyone wins, right?
Not really, no. The more I looked at Groupon, the more uncomfortable I got with the business model. Thinking of my first experience: it was, somewhat improbably, a heavily discounted ticket to see a very good choir perform Christmas carols. Not the kind of thing I usually do, but the price (which I don’t actually remember) was a great excuse to try something out of the ordinary that I’ve always wondered about.
The trouble is that Groupon’s marketing pitch to that choir would have been along the lines of “use us to get people through the door at a price that is essentially a loss to you, and obviously you’ll make it back in future ticket sales because they’ll enjoy it so much.”
I really enjoyed that evening. Did I go back? I did not.
The more I looked into Groupon, the more people I spoke to who’d run a Groupon, the more I began to see a frankly predatory business model that used the resources of small businesses – chocolate makers, cookery schools, photographers – to build its own brand and user base without offering anything in return. Worse than this direct leeching of capital, Groupon-type offers encourage regular people to massively undervalue the services provided. Once the ‘real’ price is charged they assume they’re being ripped off.
So when prices go back to normal there’s an assumption you’re being ripped off. It’s the same issue I have with well-funded online shopping sites (I’m looking at you, Amazon) who can afford to offer free delivery for years because there’s no pressure from normal market forces to actually make a profit – or even break even. Everyone who shops online then assumes free delivery is their right, and smaller companies who haven’t got well off backers go under trying to compete.
I should come clean and say I haven’t actually looked at what Groupon’s exact business model was in South Africa, as the firm does operate slightly differently from country to country. My distaste for the service was built up a long time ago, before I moved here.
You could argue, of course, that businesses who fell for Groupon’s approach of “give em the first one free” only have themselves to blame, but that’s to miss that point that – until now, at least – it had some very persuasive tools at its disposal. In the past, it’s been accused of being a “loan shark” at heart in the past, and I’m not going to disagree.
Nor am I the first to raise these points. The internet got wise to Groupon a long time ago and a company which turned down an offer of $6bn from Google is now trading at about 10% of its share price five years ago.
I’m all for online tools which boosts competition and get a better deal for consumers, but not like that, Groupon, not like that.
Goodbye Groupon. You won’t be missed.