Groupon and Google Battle for the Group Online Buying Bonanza
The End Result: The Local Businesses Will Lose…Big!
Question: Why would local businesses give away products & services for 1/2 the retail price? What kind of buyers are drawn to those incentives?
Answer from Facebook Friend: I don’t know, but after Groupon’s take it’s more like 25% of retail price. It’s good for Groupon, hence their now $15 billion valuation (Google was trying to steal it at $6 billion). However, I don’t know how good it is for the small business in reality. Bottom line is it’s free to start, and that’s not a hard sell (even if they lose money later on – Groupon doesn’t mention that).
My Response: The pitch to local businesses is suspect and the type of customer/client the local businesses will draw is the one looking for a ridiculously low price. The local business is being sold on the idea that once they get the client through the door that first time, they have a shot at building a list, being able to make them future offers, and being able to get them back again for a more profitable transaction…and a lasting relationship.
My questions are myriad but the number one issue here, and the thing the local merchant will never be able to recover from, never be able to turn that clock back from again, is the discount…that ridiculously low price and margin!
Ask a GM executive if they were able to sell vehicles as consistently, and at the kind of margins they once were able to, once rebates and incentivized financing were introduced. Yes…and no!
The fact is, once the incentives were introduced, buyers were conditioned, very much like Skinner’s pigeons, to buy only during incentive periods!
When incentives were not in play, either rebates or financing, sales plummeted and vehicle sales at the MSRP, with the expected margin, disappeared.
Beware the Sirens’ Call!
By introducing this sort of sales platform, complete with incentivization?
With the local merchants’ already close to the bone margin?
In the hope that there will be some magical carryover?
Ridiculous, foolish, and extremely short-sighted!
The local merchants are betting on the “come,” as in future income.
And Groupon, Google, LivingSocialDeals…Such a deal for you, you won’t believe!…and the rest of the online deal brokers (read: sharks) rushing in to get their share of the profits during the feeding frenzy…I mean offer…will be the real winners!
Who is going to be aced out of the transaction when Groupon becomes the local Amazon…or Google for that matter?
Think about it!
The local merchants that got the entire thing going, that’s who!
Who is also building that shared list of all of those bargain seeking clients?
This smacks of the same sort tactics companies have used since, well, since Christ left Chicago, to build businesses on the backs of others.
Take the franchise model companies have used, and still use, to build a huge regional presence when capital was lacking or nonexistent.
Who managed to pull those franchises back into the fold?
The parent companies gobbled them up once it had built the necessary infrastructure, along with the capital, on the backs of the franchisees.
And who was left out in the cold? It happened again, and again, and again! Even a certain hamburger company pulled this in the mid-70s and into the 1980s!
It will happen again, in one way or another, because regardless of the setting, people fail to learn from history!
Mark my words, I will say it again…it will happen again!
What does it cost Groupon or Google or whomever to offer merchandise offered by, inventoried by, the local businesses?
Even the “affiliates” are paid on the “come!”
Great deal for everyone BUT the local businesses!
The Pied Piper is selling the Emperor’s Clothes, so get on board! The Sirens’ Call says it all…
…Nope, nothing wrong here!
More to follow!
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