In the year 2010, Google Inc. offered a whooping six billion dollar to Groupon Inc. in a bid to take it over. However, this offer was rejected by Groupon that has raised its subscriber base by double since Google made an offer. This move is seen as a smart one because now the company is worth more than thrice what Google had offered. The company’s reasons to reject the offer were, investor such as Accel’s Kevin had high hopes for future growth of Groupon. Other reasons include, Google had offered a breakup fee that was not enough as compared to the uncertainties involved and a researcher who had worked with Google advised Groupon on how to increase its revenues. Consumer internet companies such as Groupon are seen as the next Google. Going by the recent IPO, Groupon has been valued at 25 billion dollars. This is the amount that analysts have attributed to the company.
Exhibit 1: Values at the time of offer
Source: http://online.wsj.com/news/articles/SB10001424052702303640104577440580610986086
Consumer love using Groupon to search for daily deals. It has become so popular among consumers. The reasons as to why this is so lie in the fact that consumers trust to find all they need at the search engine. Great discounts are offered to restaurants, retail shops, theatres and others. It helped transform online shopping and increasing the number of markets of its operation. Consumer love discounts pretty much, hence the discount offered serve to attract and maintain them. The fact that Groupon gives different deals daily for goods, services or event that is available locally makes it more popular. It also helps build relationships with the customer.
Though Groupon has had its successes in the online shopping it is viewed a good and a bad with same measures by merchant. The fact that they take 50% of the commission from each deal makes it bad for small merchants who are struggling to continue in business. This leaves these merchants with small or no margins. They might even incur a loss that is bad for business. Research on the merchants shows that only 50% of them sought the services of Groupon after another successful deal with them.
Exhibit 2: Groupon Values after the Google deal
Source: http://online.wsj.com/news/articles/SB10001424052702303640104577440580610986086
The most positive part about Groupon is that being the fastest growing company, merchants get good deals that make product move faster as the customer base is big. It also helps in moving inventory. Slow moving items are sold easily through Groupon. When posting items in Groupon it is like advertising a business. It thus helps to advertise businesses. The fact that it attracts many customers makes mall merchants generate increased revenue from sales and in turn increased profits.
Despite all the successes experienced by Groupon, one cannot fail to question the sustainability of its success. After this period of accelerated growth, Groupon will need to show its sustainability in the current super dynamic retail environment which has been transformed by technology. It might find itself shrinking when it comes at par with other online giants such as Amazon, Facebook and Google. For Google and Facebook, there is a big challenge to Groupon by these powerhouses of online shopping as they are already well established and have the large base of users than them. The users of Facebook for instance are committed to it and will find it hard to use another platform. These giants charge less as compared to Groupon.
It should be recommended that Groupon studies its competitors well and maintain its customers. This will enhance its place in the online shopping market and ensure it has a competitive edge towards its competitors.
