Photo: Kevin Krejci / Flickr, CC.
It’s getting harder to ignore the drumbeat of reports showing doubts about Groupon’s business model. The latest: a note today from Yipit, a daily deal aggregator that tracks Groupon’s deals, estimating billings at Groupon declined 46 per cent in the last week of November, after Thanksgiving (see chart below).Billings are the gross revenues Groupon takes in before it splits the cash with the merchants who offered the deals. Groupon still likely grew revenues 6 per cent for the month, thanks to an increase in its travel business, Grouponicus, Yipit estimated.
In October, Yipit said, billings rose 1.5 per cent.
The collapse in late November is odd given that shoppers were supposed to be moving into high gear for the holidays immediately after Thanksgiving. Perhaps shoppers don’t regard Groupons as good gifts, because they make the giver look cheap. If that’s true, it does not bode well for Groupon’s December performance.
The company did not immediately respond to a request for comment.
Groupon has two problems, where most companies have one. It’s revenues are dependent on its customers, who may or may not purchase its offers; and on its merchant clients, who may or may not engage Groupon for daily deal services. A decline in either one hurts the other. Most businesses only have to persuade customers to buy — Groupon must persuade both its customers and its suppliers to sign on.
And that’s why you’re continuing to see anecdotal reports that Groupon is having difficulty: Its margins are shrinking, leading to a decline in its stock price below its IPO level; and some merchants say only a tiny minority of Groupon customers return as regulars, deterring future dealmakers.
Having said all that, both November and October were up months for Groupon — meaning the company could do flat or even slightly declining business in December and still post growth. Fingers crossed.
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