Have heard that there are more than 1500 Groupon Clones in China and 50+ in India. While Group Buying business models are flavor of the season, I do see following inherent issues with business model itself.
- Service Businesses by offering huge initial discounts can only make money if they are able to convert new customers to loyal customers (repeat transactions a must)
- A critical mass of Customers (in and around a location) have to be part of Group Buying Company mailing list for it to make money on each of the Campaigns
- If viral doesn't work, coupon Marketing Costs will cut into margins
Following Critical success factors will decide winners
- Reach for each of the Promotion (Coupon Sale) on a daily basis with in a location
- Conversion % (How many Coupons are they able to sell)
- Commission (% points) offered by Merchants on a typical deal
- Marketing costs for each of the Campaigns (Is it Viral mainly using FB/Twitter Etc or Do they have to spend money in marketing a deal)
- Customer Acquisition Cost and Long Term Monetization of a Customer (Repeat Purchases)
Just like many other Consumer Internet Business models Group Buying will also be Winner Take ALL environment
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