Groupon fights for sur­vival as daily deals fade

The Pak Banker - - Front Page -


Groupon and its com­pa­tri­ots in the much-hyped daily deals busi­ness were sup­posed to change the very na­ture of small busi­ness ad­ver­tis­ing. In­stead, it is the daily deal ven­dors that are rac­ing to change as ev­i­dence mounts that their busi­ness model is fun­da­men­tally flawed.

Groupon last week re­ported an­other quar­ter of dis­ap­point­ing earn­ings as its core busi­ness stag­nated, send­ing its stock down 30 per cent to an all-time low of $2.76 (Dh10.13). Its big­gest ri­val, Liv­ing So­cial, is pil­ing up losses, and part-owner Ama­ ear­lier this month recorded a quar­terly loss af­ter writ­ing down its Liv­ing So­cial in­vest­ment.

Both com­pa­nies are rac­ing to di­ver­sify, ven­tur- ing into more generic ecom­merce ar­eas like off-price sales through ven­tures such as Groupon Goods and Liv­ingSo­cial’s Shop. Mean­while, up­starts are de­vel­op­ing new vari­a­tions on the dis­count coupon theme.

“It’s clear that they need to have other mod­els be­sides the email daily deals busi­ness,” said Aaron Kessler, an an­a­lyst at Ray­mond James. “The prob­lem is that a lot of these newer busi­nesses have lower mar­gins.”

Crit­ics say the tor­rid growth that en­abled Groupon to go pub­lic at $20 a share just a year ago was fu­elled by mer­chants buy­ing into a new type of mar­ket­ing that they didn’t fully un­der­stand. The dis­counts of­fered through the Groupon coupons have turned out to be costly, and the re­peat busi­ness they gen­er­ate un­cer­tain.

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