Groupon Case

Groupon was once the global leader in the e-commerce industry, achieving the reputation as the “fastest growing company in history” with their local coupon daily deals offering attractive discounts to local goods, services, and experiences to their millions of subscribers (Mason, 2015). The future was promising as they intended to be the vehicle connecting customers to small local businesses which may not have had the necessary funds or experience to reach out to potential customers. The business was built around this objective and they were extremely successful in changing local advertising (Mason, 2015). Groupon thrived and expanded internationally as consumers and business owners began to see the value in how they connected merchants and …show more content…
Their success is observed in their massive expansion into 45 countries in a very short period of time. However, the strategy Groupon undertakes in doing business with merchants results in unsustainable business relations and consumer relations. Before we look into this, we need to understand the industry that Groupon is in, in order to understand their ability to capture value. As mentioned in class, creating value does not guarantee profits – a business also needs to be able to capture value to be …show more content…
Groupon’s focus on getting considerable discounts for their customers has made them forget that they could be putting their business partners in a disadvantaged position. The discounts are great for customers, but they come at a cost that is greater than simply the local businesses’ forgone revenue. When a Groupon is offered, it can be seen as a quick and simple solution to bring in more business exposure to merchants and provide a “great deal” for customers. However, the ultimate trade-offs are the merchant experience and the customer experience. The goal from the beginning is to connect local businesses to locals who want to try something new, which still stands. However the quality of this relationship has been compromised. The low bargaining power of these businesses is evident as one can see the massive discounts these merchants are offering (a quick glance at their website shows deals offered at 50%-90% off the original price). Despite the influx of new customers, the reputation of these small businesses may be tarnished if they are incapable of meeting the sudden increase of low-paying customers. The value of their brand could also diminish as their products are now seen as less valuable since they are being offered at “such a steal”, which can decrease their overall