Friday, August 26, 2011
This article (http://www.theatlantic.com/technology/archive/2011/08/the-fall-of-groupon-is-the-daily-deals-site-running-out-of-cash/243863/) in The Atlantic is interesting. Steve Lackmeyer pointed it out via twitter.
The Groupon Model does not work for me. A company promotes businesses with discounts to the public. Groupon does very little. A middle man in the transaction.
For us Groupon would promote a deal. Say get $40 of goods or services for $20. Groupon then takes half of the $20 with the studio getting the other half. That would be $10 for a $40 item. That does not even cover our cost alone in a $40 item.
It sounds good on the surface but really does not work.
Living Social does the same thing. Offering a glassblowing lesson that is $75 at half off $37.50. Half of that again is $18.75 to the studio for a one hour lesson. Raw operating cost alone is over $40 an hour. In their sales pitch they say the increase in repeat business will off-set the loss.
Sounds like a crazy deal for the small business owner.