Groupon Inc (GRPN)’s Business Model Can Be Cause For Concern

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Groupon Inc (NASDAQ:GRPN) a deals company that is transforming itself into a local marketplace with personalized offering, was the subject on CNBC’s “Squawk Alley”, the discussion including Jon Steinberg, Daily Mail North America’s CEO. They discussed Groupon and its local focus and how that gives it a greater headache than people ever thought.

Groupon

Talking about local space, Steinberg said it is a competitive segment and the fact that Google Inc (NASDAQ:GOOGL) and Amazon.com Inc (NASDAQ:AMZN), for instance, are in there makes it a complicated place for Groupon Inc (NASDAQ:GRPN), which can’t match the financial strength of its competitors.

One of the experts also pointed out that looking at Groupon Inc (NASDAQ:GRPN)’s performance numbers suggest that the company is not getting a piece of the pie as they may want from the merchants and that challenge could keep eating away the company. However, Steinberg said that there appears to be some light at the end of the tunnel for Groupon.

“[...] It was actually a miss on revenue, and not to struggle to look for bright spots, but to try out something not everybody is saying. They did actually make up 400 basis points more on gross margins on goods business, which is when they directly sell stuff. If you want to look for some case or maybe if you could see light at the end of the tunnel there are a few possible signs that there could be margin improvement,” he said.

Although competition is a serious headache for Groupon Inc (NASDAQ:GRPN), the company’s business model is also something of great concern.

“I think the model kind of stung from the beginning; this is one of those things where a lot of merchants who were involved with Groupon early didn’t particularly like it, they didn’t make out that well, unlike Yelp that didn’t have the same kind of customer loyalty [...],” said one of the experts about Groupon Inc (NASDAQ:GRPN)’s business model.

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1 Comment

  1. “Groupon Inc (GRPN)’s Business Model Can Be Cause For Concern” so does Amazon’s. Despite all that Amazon is a $150B company, Groupon $4B. At this time Groupon clearly undervalued and ready for a buyout.

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