Page 247 - Introduction to Electronic Commerce and Social Commerce

Closing Case: Groupon: Will the Company Prosper? 231

Limitations of the Model tries). Yipit (yipit.com) is an e-mail-based “daily deal
aggregator” that gathers deals (in your city) on products
Smaller vendors may not be able to fulfill large orders gener- from daily deal sites such as Groupon. Tell Yipit what you
ated by Groupon. For example, a restaurant in Tokyo sold want, and they will alert you when there are deals that match.
500 Groupons for a traditional New Year’s dinner, but the Groupon still controls more than 50% of all daily deals in the
business was unable to process the orders in a timely fashion USA.
due to the overwhelming demand of the orders. Apparently, Possible future competitors include Yahoo!, Amazon.
some of Groupon’s deals became too large for vendors to com, Yelp, and local and national newspapers. Finally, some
fulfill, and customers complained about late deliveries and major retailers, manufacturers, and service providers (e.g.,
about orders arriving “in terrible conditions.” Walmart, Home Depot) offer daily deals independently.
In response to such a problem, Groupon officials have
created formulas to help vendors it partners with to deter- Factors in the Competition
mine how to meet consumer demand, and how many cou- It is challenging to compete with Groupon, given its large
pons to offer (capped the orders to a reasonable number). size and resources. Therefore, competitors use strategies
Another limitation is that some businesses may not make such as concentrating on a niche market, which targets
money on the deal and may possibly even suffer a loss. consumers in smaller demographics, such as one product,
Finally, although Groupon and similar companies can gener- or one industry (e.g., tickets for sporting events; crowd-
ate large revenues, they may have large expenses as a result, seats.com, travel, food, and fashion). In addition, some
and actually lose money by offering more deals. Thus, the sites concentrate on a small territory (e.g., a city) where
profitability of the model is questioned by many, especially they have a competitive advantage (e.g., see scorebig.
in light of the strong competition. com).
Groupon is attempting to become more than just a deal of Several sites have either folded (e.g., Facebook Deals) or
the day business. As part of their branching out, in November were acquired by another company. For example, BuyWithMe
2013, Groupon opened an e-commerce “marketplace” was purchased by Gilt Groupe, Buy.com was purchased by
(online retail site), known as Groupon Goods (groupon. the Japanese company Rakuten.com Shopping (rakuten.
com/goods), which focuses on slightly discounted products. com), and private travel site Jetsetter (jetsetter.com) was
These deals also have a time limit (ranging from 3 to 7 days). acquired by TripAdvisor in 2013. As of March 2014, Groupon
In 2011, Groupon partnered with Expedia (expedia.com) has acquired 30 sites, including the hotel booking site Blink
to launch Groupon Getaways (groupon.com/getaways), (blinkbooking.com), which is now known as “Blink by
which focuses on discounted travel (hotels, tours, etc.). Groupon.” In January 2014, Groupon announced that it had
Groupon also has a program called Groupon “Reserve” has acquired “Ticket Monster,” a Korean e- commerce com-
(groupon.com/reserve), where participating restaurants pany (a subsidiary of LivingSocial).
give diners discounts when they have empty tables. Unlike
the usual daily deal where you buy a voucher, with Groupon Recent Developments
Reserve, you make a reservation online and show up.
By March 2016, over 50% of North American transac- In 2015, the company lost money and laid off 1100 employ-
tions were completed on mobile devices (see groupon.com/ ees and closed operations in nine countries. (For the down-
mobile). sizing, see Lunden 2015). Groupon, Inc. (2016) reported in
its news version 16.3 about significant efforts to return to
The Competition profitability. Among them are:

As with any successful business, there are many companies • Mobile and Web tools are in one brand-Groupon Merchant
that are attempting to clone Groupon. Worldwide, there are • Groupon Merchant tablet app includes several useful
thousands of similar sites. For example, there were over capabilities for merchants (see Lunden 2016).
1000 similar companies in China alone, but many did not • Several features were added to expedite transactions
succeed. Nevertheless, as of November 2013, Groupon’s • Expand its travel deals (see groupon.com/Getaways).
only serious competitor is LivingSocial (livingsocial.com),
sponsored by Amazon.com, with competition from Google In addition, Groupon launched its own food delivery busi-
emerging. Google Offers (plus.google.com/+GoogleOffers/ ness (Perez 2015a). Groupon is using social media to adver-
posts) which is available on Google+. Other notable com- tise its operation.
petitors include Gilt City (giltcity.com), Gilt Groupe (gilt.
com), Woot! (woot.com; an independent subsidiary of Example: The Banana Bunker Going Viral
Amazon), and HomeRun (homerun.com; available nation- To promote the product sold by Cultures Containers Company,
ally and in limited cities along with three European coun- Groupon started a viral campaign. Groupon provided the plastic