The Dotcom Smart Model: A look at Groupon

Until today, I never understood Groupon’s Business Model. I wonder how investors in Groupon are feeling. How could this business model work in the long run when mostly only price-sensitive customers show up on the doors of merchants who sign up on to Groupon deals.
One thing I have learned from today’s E-commerce business models is that, they start, create the buzz needed to attract investors, list on the stock exchange, Founder gets listed in the Forbes 400 billionaires list and then the company is left to rot in the hands of market forces.
Smart ones then adopt the “holding company / investment management model” – buying new businesses in different sectors and hoping to make enough return on investments to pay shareholders. Most of which do not succeed in that.
When Groupon listed in 2011, it had more than 83 million customers operating in about 43 countries. In that  same year Groupon lost $254 million on a $1.6 billion in revenue. Wheeew!!
I hope the companies Groupon purchased are helping. In my small country Ghana, I’m yet to know of any merchants on the Groupon deal.
Is the future bright for the sake of untapped markets (like Africa) or for the sake of the model?
Truly, everyone likes cheap things especially when the price is sliced into two. But who would like it when the prices go back to normal? If I’m the merchant, customer acquisition alone is not what I’ll desire. I know people’s taste can change and even to the most loyal customers, price still matters. 

The e-commerce revolution is still unfolding and we are all hoping to tap into the smart model. If you get burned or turn into millionaire, Naija man will say, “na waa for you ooo”. 

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.