Answer the questions given in the Case Study

New Business Models O Social Shopping with Groupon Launched in November 2008 in Chicago, Groupon calls Many enthusiastic supporters have called Groupon itself a collective-buying platform that features daily deals a runaway success, but an article on TechCrunch.com for things to do, eat, see, and buy in more than 40 countries. identified some potential problems with Groupon's By promising businesses a minimum number of customers, business model. It needs a lot of salespeople on staff Groupon can offer deals that aren't available elsewhere. for each market it handles, and there are no barriers Groupon sells coupons for deeply discounted products to entry or switching costs for either buyers or sellers. and services to its subscribers, who then have a period of Business models that rely on this approach have dif- time, such as a year, to use those coupons to purchase the ficulties sustaining their profit margins and become less products and services from the supplier at the discounted attractive as time passes. prices. Groupon At the end of 2010, Groupon's revenues were in the www.groupon.com $50 million per month range, and the company had roughly 50 percent gross margins, making it one of the Questions fastest-growing companies on record and drawing a valu- 1. Why has Groupon been so successful so quickly? What ation of $6 billion from Google, which Groupon turned advantages does Groupon provide to marketers over a down, reminiscent of Facebook's refusal to accept a multi- website such as Woot? billion-dollar offer from Yahoo! Interestingly, in mid-2010, another social shopping 2. What can Groupon do to avoid having its margins website, Woot.com, agreed to be acquired by Amazon Inc. crushed by competitors? for about $110 million. Woot's business model was admit- 3. Why do you think Groupon didn't accept Google's tedly different from Groupon's (i.e., Woot.com offered a offer? Was it the right decision? Why? limited quantity of one product at a special price per day). Sources: www.groupon.com; http://techcrunch.com/2010/10/17/why But the difference in valuations is nevertheless striking. groupon-is-no-ebay/