Yes, there are many business owners that lost money on Groupon deals, possibly because they sold more than they expected and couldn’t meet demand, neglected their existing customers or simply suck at customer service or maybe they just made bad business decisions with their pricing…is any of that Groupon’s fault?

Nope.

Having experienced several successful Groupon deals first hand, I can tell you without a doubt that it can and does work. Maybe not for every business (I agree, many local restaurants will have a hard time pricing or planning effectively), but if you provide a great service or product, price correctly, plan for the up-sell and treat the customers wonderfully, most or them WILL come back.

If, as suspected, the conversion rate is pretty low for the typical groupon-buying consumer to toggle to a LOYAL customer at a given establishment, then the business that signed up with Groupon will either not be repeat business for Groupon or expect to pay A LOT less for what amounts to a heavily discounted one-time customer.

Having talked to a bunch of friends in food-related and exercise related businesses within San Francisco, they report that the groupon (and Living Social) buyer converts to long-term customer at a pathetically low rate.

True, it’s intoxicating to see the wave of business march through the doors, but hugely expensive to snare it, and a complete buzz kill when it proves illusory.

This is not to suggest that Groupon’s sales force has no value or that it’s mailing list has no value, or even that these issues are unique to Groupon.

It just suggests that rather than finding a way to turn lead to gold, Groupon is selling a promise of delivering gold, but yielding only pennies for dollars, which over the long haul will force margin contraction.

By contrast, I think of Amazon back in the day. For the longest time, people were dubious about Amazon’s path to profitability, but the difference there was that they HAD built a better mousetrap, you could SEE it in terms of customer loyalty, repeat buy patterns and the durability of their relationship with manufacturers.

Are there segments or shining examples where businesses are seeing the long-term durability of what Groupon is selling them? I don’t see it, although conceptually love the category.

When the product/service/business model can be easily copied the first mover advantage becomes almost negligible because it expires very quickly as competitors enter the market.

You have to substantiate your first mover claim for any of this to make sense. That claim is mos def spurious, nahmean?

Ultimately Groupon’s real competition are all the other marketing opportunities that restaurant operators have. If Groupon isn’t cost-effective for restaurants, restaurants won’t offer Groupon discounts, and Groupon’s revenues will dry up, regardless of how popular the service is among consumers.

Look at Groupon in light of what it can actually offer long term to justify it’s valuation, there is no real first mover advantage, Wheeler did not ‘discover’ anything, this idea is hundred of years old, and has been tried online hundreds of times, what Groupon has is a ton of cash, once this is gone, well, have you heard of WebVan?

Ultimately, if Groupon and its peers all die, I’ll be sad but I can live without it. I’d be more concerned with Zipcar’s fate – Zipcar is a car sharing service that’s also going to IPO soon and is, iirc, unprofitable at present. But this service really enables urban residents to forego the large fixed cost of having a car – they can convert it to a variable cost, and for the folks who don’t drive much (like me), this is a huge advantage. Here’s hoping that Zipcar makes it. When my car dies, if we’re in a big city we’re going Zipcar.

PS, after the ACSOI fiasco, I coined a summary of Groupon’s IPO filing: we’re losing money on every sale, but at least we’re making up for it with volume!

In any case, I don’t see how being the generic term helps them. If, say, FourSquare, or Facebook, or local newspapers can provide deals that seem more desirable to users, at a lower cost, because they have more granular information on where users are at specific times, then Groupon is toast.

The quality issue is really more relevant to whether ANYBODY should be in this business. My experience with these coupons is that every now and then they prompt me to try a new place (which is obviously the goal of the merchant offering them). I can’t actually think of a single place that I discovered via a deal and then went to again. I can think of a place that keeps offering groupons more often than I actually want to eat there. I might go and pay full price some time, if they didn’t keep offering me opportunities to pay less. So this is clearly a money-losing proposition for them, and I can’t figure out why they keep doing it. The most common thing, though is for a groupon to save me money on a place I already liked, or to prompt me to try a place I’d been hearing about meaning to try for a while (and probably would’ve tried within 3-6 months even without the deal). In this case, there may be some advantage to the place in question in terms of moving my spending there earlier in time (though I very much doubt any reasonable discount rate would find an improvement in the NPV of my spending). There’s also a question as to whether the deal may cause me to shift some spending away from similar places, to the deal-offerer, but with so many places offering deals, this looks like a race to the bottom, not a source of competitive advantage.

In any case, I think the whole deal market is pretty clearly unsustainable. Somebody may emerge making money from offering coupons, but the size of the deals is going to shrink, and/or they’ll become shorter term. Restaurants offering $25-for-$50 coupons (on which they may only be collecting $12.50), that last 6-9 months, are IMHO slashing their own wrists. For the places I like, I kinda wish they’d stop doing this, because I suspect that it actually harms their future prospects.

If you are in NE Portland, please visit Wayne’s Chicago Red Hots, which has declared Mondays “Poop On Groupon Coupon Night” in hopes of capturing the value of discounting to a targeted list of customers for itself.

Also I have seen no evidence that “group buying” exists in any meaningful way. It’s a moot point, since at this point everyone, their family, their friends, and their animals is already signed up on Groupon, Living Social, and a few others, and ignoring 99% of the offers.

This is not true. From the S-1: “Featured merchants. This metric represents the total number of merchants featured in a given time period.” As compared to “Cumulative customers. We define cumulative customers as the total number of unique customers that have purchased Groupons from January 1, 2009 (the first date we began tracking unique customers) through a specific date.”

Groupon shouldn’t even be thinking about trying to take on the China market now. That’s just bull hockey. They will throw money down that hole for awhile and then presumably find some face-saving way to get out.

Sorry that’s a huge red flag for me. Ebay had millions of dollars in profits and still failed in China. How is Groupon expecting anything different?