I’m curious about how the websites like Groupon and Living Social get their deals. Do they have a sales force? Are the deals 100% exclusive to them? My guess is that they are.
Also, is there a way to aggregate deals from across the web? Not ALL deals, just a good chunk. And if I find a deal, can I just offer it on my site, sand compensation?
Thanks.
Stores call them up and they work out a deal together. The store can do, more or less, whatever they want (though 50+% off is strongly encouraged) but Groupon has a good idea as to what works and what doesn’t. I’m not sure what you mean by 100% exclusive to them. If I ran an add with them for 50% off some product, there’s no reason why I couldn’t give that deal to any other random person or run it in a local circular as well.
If you’re asking if these are deals that are already on the web and Groupon is going out, finding them and reposting them on their own website, then no, that’s not how it works.
Also, it should be noted that stores have to consider this as advertising, they really don’t make money on the sales, in fact, they typically lose quite a bit. If I normally sell Widgets for $100, but offer them up on Groupon for $50. You pay Groupon $50 and get a voucher that you bring to me to get your widget. Groupon pays me $25 less credit card fees for each coupon sold. So, in the end, for each widget that I would normally sell at full price, I will now get less then 25% of my retail price for.
Forbes had a good article last year about how Groupon got started, and mentions that they have (as of last year anyway) 250 sales people and 70 writers. I’d imagine that number is higher now.
http://www.forbes.com/forbes/2010/0830/entrepreneurs-groupon-facebook-twitter-next-web-phenom.html
I imagine because most of the groupons offered are services rather than goods, they can afford to take a hit on their normal profit margin. I think the business approaches groupon, rather than the other way around.
Actually, Groupon typically approaches the businesses themselves. I suppose it occasionally happens the other way around, but the vast majority of their deals are created by their sales staff who then approach the individual business. A FOAF has been doing that for Groupon for a while now, and can confidently state that they have to seek out businesses. The person I know who does this works long hours to find deals, and there are usually not businesses lined up to take advantage of Groupon’s “assistance”. Here is one business owner’s take on the utility and economics of Groupons. As a result of many business owners coming to the same conclusion, its become harder to sell owners on the deals. That’s why you see many of the same businesses over and over again on deal sites, or you get national deals rather than local ones. The national deals are often used when a local sales person has a hole in their schedule.
It’s one of the issues that Groupon, and other sales sites, are facing right now. It’s a very labor intensive business in the sense that you need lots of local people to craft these deals on a regular basis, then sell the companies on them. It’s not as scalable a business as it appeared from the outside when there were no hard numbers on companies like this. Now that Groupon is planning an IPO, we can see just how the company works. Groupon’s revenue for the first quarter of 2011 was $645 million, yet they had a net loss of $103 million (they lost $413 million in 2010). You don’t spend/lose that kind of money if you are basically just answering the phone as businesses call you to offer you free money for sending out emails. They work extremely hard to sell companies on the deals they create. In fact, they now have 7000+ employees.
Wow. Great answers. Thanks!
Now, leaving Groupon and the other major players aside, is there a site that simply scours the web for deals and places them in one place?
Several. The one I frequent is http://www.bensbargains.net - I also check http://1saleaday.com/ every day. Mostly crap or unusable stuff, but on occasion there is a real good bargain there.
NO DISCLAIMER - I’m not affiliated with either site.
On the “exclusivity” part, there actually is some exclusivity in the deals.
My business has run several Groupons in various markets, and one thing in the boilerplate contract is that you won’t advertise a deal with equal to greater savings anywhere else for X months. In other words, Groupon doesn’t want the consumer being able to get a better deal anywhere else.
For me, it worked out, and I’m glad I did the Groupons.
The businesses don’t necessarily take a loss on the coupons–since they have an expiration date, it’s entirely possible that large numbers of people buy the coupons, then forget to redeem them. That’s free money.
For your other question, there are a lot of “deal” sites out there. I find the message boards at those sites to be really useful. Here’s a couple that I go to:
Some of them that are services (like hairdressing or sit-down restaurants) also don’t manage to fit you in before the coupon runs out, and then you’re just out of luck. I’ve had this happen so often that I don’t buy them any more and would recommend nobody in London do so; a few have refunded the money, the rest have ignored me.