How did Groupon startup?

Komelika · Oct 8, 2011

1. Capital needed to start?
2. Did they start selling to merchants (assumed) to get the public interested or did they get the public interested to to entice merchants?
3. Seeing as how groupon has a long waiting queue for merchants interested why not copy and apply identical model to a niche in the market to draw in specialized merchants? Launch, generate revenue, repeat with a different niche.
Instead of groupon, you have "groupon" sporting goods, "groupon" home service, "groupon" beauty... and on... and on... and on. Thoughts?

Miss10 · Oct 8, 2011

I often wonder that and recently though of trying something like that myself. I'm not sure how you'd start either. I imagine it would be difficult enticing suppliers to participate without the numbers to back you up - and difficult
to entice people to join without the suppliers...a catch 22. I think you could get around both of those with some hard work and persistence though. But my main concern was how much money you'd need to market yourself to rise above the noise of the groupon type offerings.

JEdwards · Oct 8, 2011

Komelika said:
Instead of groupon, you have "groupon" sporting goods, "groupon" home service, "groupon" beauty... and on... and on... and on. Thoughts?

Most businesses that go with groupon lose money. Restaurants for example have a min 33% food cost. Groupon pays 1/4 of the full price, ($30 groupon for $15 bucks, restaurant gets $7.50) so for a restaurant to put up a deal. They will lose money. That is why if you look there has been not too many restaurants on there. and they have moved to massages and tours. golf and such. (there are some restaurants, but not many that repeat)

You would be hard pressed to find a good deal to give in most other industries.. If it is a service yes, but that only goes so far..

Why would you buy in advance plumber service? Why would a plumber come out for 1/4 their normal fee?

Or beauty products, or any products.. You are not going to sell a bottle of Shampoo for 1/4 the retail price.. You will lose money and there is nothing to say that the customer will buy something else at all.

Also finding buyers, there are no less than 10 deal of the days sites here locally.. which most are national.. gonna get killed..

H. Palmer · Oct 8, 2011

Actually, Groupon is one of those many examples of companies that started out on a completely different path than what they are currently doing.

The CEO of Groupon - can't remember his name right now, except his first name is Adam - was involved in another startup with an investor where they built a website that helped organize groups of people working together on a project. This was not a profitable enterprise, but they discovered that the most revenue that came in came through collective buying.

In MFL terms at this stage they discovered the Need. N.

The CEO transplanted this idea to a new startup named Groupon which took off from Chicago and spread over the US and then overseas. A bit in the same vein as Facebook did.

Groupon is a huge business now, but not without problems. The achilles heel of Groupon is that the business model is easily copiable. Clones of Groupon are sprouting up all over the world and Groupon in its present form does not have the edge. Collective buying will become a commodity.

In MFL terms Groupon is in a business with a low entry barrier. It does not have an E.

CommonCents · Oct 8, 2011

groupon deals work well for businesses who sell services, and can then translate some to repeat customers. Even if they have to discount after the fact they will not be paying the groupon fees. My friend's med spa is jamming. She has negotiated much lower fees than 50% as well. She has no less than 10 groupon sites calling on her.

Businesses as Jack mentioned that have hard costs have trouble with the half off price structure.

It's time for independent reps to call on biz, representing many coupon sites. Biz owners don't like dealing with many seperate reps as it is too time consuming. Same goes with consumers, people are going to get tired of getting 10 emails a day of unrelevant offers, a coupon aggregate site representing all the sites would deliver value to the consumer, one stop shopping something like travelocity does for all airlines. The daily email idea will be morphing into an efficient, mass specialized group buying service.

Komelika · Oct 8, 2011

Interesting. Considering the popularity of the concept, imagine if you could crack just one niche and generate sales. It seems that there would be buyout interest.

900 · Oct 8, 2011

Komelika said:
Interesting. Considering the popularity of the concept, imagine if you could crack just one niche and generate sales. It seems that there would be buyout interest.

This is becoming a super crowded space. To get a sense of how crowded, check out Yipit.com which aggregates most of the deal services.

biophase · Oct 8, 2011

CommonCents said:
My friend's med spa is jamming. She has negotiated much lower fees than 50% as well. She has no less than 10 groupon sites calling on her.

Is she continuing to use it? My friends that I know who have used it or Living Social got many customers, but poor results afterward and will not use it again.

CommonCents · Oct 10, 2011

biophase said:
Is she continuing to use it? My friends that I know who have used it or Living Social got many customers, but poor results afterward and will not use it again.

Yes, she uses multiple services now, the competition has caused them to drastically reduce their commission %. She uses it as customer acquisition with no upfront cash spent(unlike yellow pages etc..), mainly for discounts on repeat/ongoing type services. Yeah, there are many one timers but she still makes margin on them. She only has to do the % split w/ the coupon service once as she gathers customer info on their first visit and can offer them similar deals directly in the future, paying out nothing. I think the coupon sites try and discourage this, but she says sue me! LOL.

Once you get a flow of customers through your door and then its up to you to upsell, cross sell, and retain them.

These deals aren't great for one time hit products/services(painting, plumbing etc..) IMHO but rather repeat residual type services.

I mentioned aggregators before, not surprised to see a svc like yipit. I'm sure they can do well just driving traffic, selling data etc even if they get cut out of deals. Doesn't Groupon do a 15% affiliate program? Why wouldn't they offer that to a Yipit as well?

SHHDlove · Oct 10, 2011

900 said:
This is becoming a super crowded space. To get a sense of how crowded, check out Yipit.com which aggregates most of the deal services.

It is going to be fascinating to watch this train wreck happen. I wonder which companies are still going to be in existence in three years? Hell, we might be all doing google daily deals and completely forget about who started this whole mess.

Komelika · Oct 11, 2011

What kind of programming does yipit use to compile all that information? I'm interested in databases, but I have no idea how they work or how expensive it is to outsource their creation. Any experience with this?

900 · Oct 12, 2011

Komelika said:
What kind of programming does yipit use to compile all that information? I'm interested in databases, but I have no idea how they work or how expensive it is to outsource their creation. Any experience with this?

No real idea, though I'm working on a project that does similar things, and it's so far fairly hard (but I'm not outsourcing, as my co-founders are tech guys). There are APIs out there, otherwise it's a combination of scraping where it's legal, and building working relationships with each site.

Check out Yipit's founder's blog for more info....

Entrepreneur | Vinicius Vacanti

Komelika · Oct 12, 2011

What a gem! Thanks for the blog link!

BeachBoy · Oct 12, 2011

Komelika said:
3. Seeing as how groupon has a long waiting queue for merchants interested why not copy and apply identical model to a niche in the market to draw in specialized merchants? Launch, generate revenue, repeat with a different niche.

do you have proof of that? I have read different things and also that groupon has quite big financial issues.

Komelika said:
Instead of groupon, you have "groupon" sporting goods, "groupon" home service, "groupon" beauty... and on... and on... and on.

Groupon clones are dime a dozen, for regions and for commodity/groups!

TMac · Oct 12, 2011

The Story Of Groupon: From Failure To An Industry-Changing, Profit Machine – with Andrew Mason | Business Tips

just listened to this interview....

Welcome to the only entrepreneur forum dedicated to building life-changing wealth.

Build a Fastlane business. Earn real financial freedom. Join free.

How did Groupon startup?

New Contributor

PARKED

Legendary Contributor

Silver Contributor

Silver Contributor

New Contributor

New Contributor

Legendary Contributor

Silver Contributor

New Contributor

New Contributor

New Contributor

New Contributor

New Contributor

New Contributor

Sponsored Resources: Jumpstart Your Fastlane

Post New Topic

Fastlane Insiders