Techcrunch has an article about Groupon closing down in 7 countries, sacking 1,100 people and taking a pre tax charge of $35 million. It is pulling out of Morocco, Panama, The Philippines, Puerto Rico, Taiwan, Thailand and Uruguay. It also recently pulled out of Turkey and Greece and sold out of Groupon India to Sequoia.
Prior to the closures, Groupon was active in 40 countries. The strategy for Groupon has been to rebalance from a focus on daily deals to a wider range of businesses based around local commerce, which has met with mixed success. Groupon has tried to evolved from a business focusing from a largely hand managed daily deals site to a true e-commerce technology platform and their operational model has had to evolve.
What does it mean for Restaurants?
For Restaurants, this would be a significant victory in the affected countries. We have long seen a correlation between Restaurants running their first Groupon campaign. Many will run 1 campaign, then run another one 2 months later, then another 1 month later and 2 the next month and then the phone goes dead. The Groupon death spiral is something that we have seen too often. It has claimed many restaurants, many of them ordinary Restaurants, but sometime it claims great Restaurants too.
Coupon buying for Restaurants
We have written about the best practices for Groupon Marketing and how to manage Groupon campaigns. Many Groupon customers are loyal to Groupon, it is great for consumers because they get to have a great meal at a deep discount, but many Restaurants were forced to rely on the non-redemption rate of the coupons to turn any profit from a campaign. This often creates a bad impression with the customers when the coupons aren’t acceptable and creates bad word of mouth.
Best practices for Coupon marketing include:
- Take the bookings online to collect customer contact details (including email)
- Ensure wait staff know about the possible upsells
- Limit the number of redemptions during prime time
- Structure the offering to encourage early in the night or on the quieter days
- Remarket to the customers once they have come in.
What is the future of the Groupon Business Model?
The fact the they are pulling back from so many countries indicates that the business model is struggling for profitability. Many Restaurants have been burnt in the past and the word has got around that it is very difficult to convert a Coupon customer to become a regular customer. The question is whether they will be able to recast themselves in a model that creates some value for Restaurants while still providing great value for diners.