Business Mistakes - Groupon - An Overnight Sensation, Now Struggling to Stay Afloat - Learn From Their Mistakes - ISSUE 34 - 4/3/12

I was watching the news this morning and low-and-behold, there was a short segment on Groupon and their business mistakes. The segment was not mind-boggling at all, but instead, was exhilarating and solidifying my initial prediction from when I first learned about them while I was living in Chicago and they had just started becoming a nationwide craze.

In the beginning, I bought a handful of Groupon deals myself, but I failed to use them in time and the money would go to waste, so I just stopped buying them. I'm not a big-time consumer like many people are. I was also flooded with similar deals every day in my email inbox and within a short period of time, I unsubscribed to their daily deals. There's no possible way most people would be able to afford and take advantage of more than a few per month. Even if people think they are, most people are not made of money.

Groupon's stock values have plummeted recently due to bad business decisions from about $26 per share to just under $15 per share since November 2011 and are struggling to stay afloat. They mismanaged their money and did not set aside enough money for customer refunds. This just proves that no matter how much money you have, you can lose your power-house momentum overnight with technology changing and evolving so rapidly. Every business owner must plan, plan, and plan some more for every possibility and every situation that may arise, because guess what, it's going to.

I have two very important business lessons to share about Groupon. First, if Google offers you $6 Billion, you take it! You cash out and move on to the next business venture. It's just pure foolishness not to take it simply because their business is way too easy to duplicate (LivingSocial) and over 90% of all businesses fail within the first five years anyway. Of those who actually survive the first 5 years, 90% of those end up failing also. It's just common sense! Look at companies like Blockbuster, Blackberry, etc. They were conglomerates and now they are minuscule little companies fighting for their survival.

Secondly, the companies who are partnering with Groupon are not benefiting from their service and not receiving a Return on Investment. Groupon takes half of the coupon sales proceeds and the businesses don't make any profit. The idea is that traffic will increase to a particular business after the initial experience and the business should begin to make profits on subsequent visits.

However, the ideal situation is not taking place. Patrons buy the Groupon deals and don't visit the same restaurant, bistro, massage therapist, etc more than once. Also, the businesses are not able to keep up with demand on their products or services which Groupon has created for them. The quality of the product and service is jeopardized and in most cases, sub-standard and businesses are closing up shop because of this.

What are some of your ideas of a better coupon system which creates a win-win-win situation for the coupon company, the business, and the customer?