Amazon just killed Groupon

by Robert Tyson

Actually they didn’t. Groupon was always too easy to replicate. But the entry of Amazon into this market (see the email I just received from ‘Amazon Local’ below) is the absolute death-knell for Groupon.

There are no barriers to entry in the ‘daily deals’ market. Anyone could set that kind of business up.

And, by definition, the consumers who take up those deals are driven by one thing and one thing only – price – meaning they’re highly unlikely to have any loyalty to any given deal site.

Cue a race to the bottom for daily deal sites, and, by implication, the small businesses who offer these deals. Just to make these deals fly in an increasingly competitive space, vendors are going to be asked to cut their prices even closer to the bone. At a certain point, they’ll figure out that it just isn’t worth it.

Sounds like a horrible ‘deal’ no matter what side of the fence you’re on.

Amazon just killed Groupon

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  • http://appetite.paulnshapiro.com Paul Shapiro

    Hello from Triberr. I am not sure many can compete with Groupon. Google and Woot.com both have competing services too.

  • TheTysonReport

    Hi Paul, and thanks for your comment. I wasn’t aware of Woot, nor Google’s service – seems like this market is getting more and more crowded by the minute (and with some formidable players too)!

  • http://taylormarek.com/ Taylor Marek

    Don’t forget Facebook rolled out their own local deals as well. Groupon is just being squeezed out the middle and all the better for it because their business model is sketchy.

    • TheTysonReport

      Thanks for commenting Taylor. I wasn’t actually aware that Facebook had a deals offering too, but they and Amazon already have massive advantages and, as you say, that bodes very ill for Groupon.

  • Joe

    Nice trick. Amazong just killed Groupon, Actually they didn’t. I won’t visit your site again.

    • TheTysonReport

      Sorry if I upset you but I don’t think the opening line detracts from the sentiment.

  • Hendrik Little

    There are certainly issues with GroupOn’s business model but I don’t think it’s quite as bad as you’re making out. GroupOn (IMO) had a good idea, with one particular flaw: They over-estimated the intelligence of their customers.

    Many small operators, with a poor understanding of business economics, jumped on the GroupOn bandwagon and then proceeded to make the classic ‘we’re losing money but we’ll make it up in bulk’ error. Not wanting, or able to realise their own mistake, these businesses then blamed GroupOn for their losses. GroupOn got a ton of bad publicity, investors bailed and they lost market share.

    I think the ‘daily deals’ model /can/ work but it’s not as simple as it’s being made out to be. Basically, you get customers in with the low price and then deliver an outstanding service that will make it worth their while to become regular customers, even at the full price. You also have to factor in that ninety-plus percent of the initial extra business that you see will be ‘price tarts’ that you never see again.

    Make sure that the figures add up, and you can benefit. If they don’t, don’t touch it.

    My tuppence.

    Hendrik Little
    Proprietor and Lead Developer
    07928 597 542
    * http://www.WaveCrestIT.co.uk
    * http://WaveCrestIT.blogspot.com
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    • TheTysonReport

      Thanks for stopping by Hendrik. The problem with Groupon as I see it is not so much negative publicity but simply that there is nothing to stop anyone else from doing what they’re doing.

      I now get a ‘deals’ email every day from Amazon. I’m sure there is an opportunity for somebody there but I’d back Amazon over Groupon any day of the week.

  • Pingback: Groupon? Don’t bother

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