DEAL OR NO DEAL

In this digital world where businesses work at speed of thought Companies are finding new ways to sell their products and improve their revenues. The revolution in Internet and e -commerce has also helped companies immensely. Companies look at social networking websites like Facebook, Twitter, My Space and orkut to promote their products and services. There are other online companies like Priceline, E-bay, and Hotwire, kayak which collaborate with medium and large businesses and sell their products and services and take commission on the sales. Their profit margin is based on revenue sharing and number of people buying products from their sites. Groupon is one such Company founded by Mr. Andrew Mason in, November 2008.

The Name Groupon is derived from ‘Group’ and ‘Coupon’.  It’s an online website which works with local vendors in 150 cities across United States. There mode of operation is very simple. They will first negotiate a deal with local businesses primarily small and medium sized businesses.  Groupon will then post the deals on Groupon.com.  You will get the deal only if certain number of buyers takes the deal on same day. This mode of operation has helped many small vendors to target new customers who find these deals highly lucrative and well under their budget.  This way its win wins situation for everyone   vendors, customers and Groupon.  

There is also an argument that Groupon takes 50 percent of revenue and takes out the profit margin from the vendors. For example if the vendor negotiate a deal for dinner at $14 on Tuesdays. Once Groupon find 2000 customers for the vendor and deal gets through successfully. The Vendor needs break even with Groupon. This makes it very difficult for vendor to earn or recover cost.  I would argue that it’s something vendors need to calculate and decide before posting the deal. They cannot just post the deal for the sake of getting new customers.  Moreover they should also decide on the volume of customers and adequate services in place for this number of customers.

I believe Groupon is a great way for local vendors to gain new customers and improve businesses. It’s also successful business for Groupon too. Groupon earned $500 Million last year and they are going strong.  There are Rumors in market that many big companies have offered their interest in Groupon like Facebook, Yahoo, and Microsoft. Most recent of all is Google who wants to buy Groupon to strengthen their advertising business and have a local presence with local markets. Google also fears that if they won’t buy Groupon their competitors like Microsoft and Amazon can buy it.  They valued Groupon $6 billion. But Groupon rejected the offer and wants to grow independently.  They are also planning   to go public with an initial public offer. I think this horse is running strong and fast. It would be great for customers and local vendors to take advantage of it and bring businesses back on right track. Meet The Fastest Growing Company Ever