As Groupon Inc(NASDAQ:GRPN)’s board gets together this week, the embattled Internet daily deal champion is likely to look beyond the performance of Andrew Mason, the chief executive.
The company based in Chicago has had an imperfect business model. If the members of the board can come to the conclusion that Mason is not the most suited person for the post, Groupon is likely to discover that hunting down the right person may turn out to be harder than expected.
Groupons’s shares are down 80% ever since it has gone public in November. The company has lost out on money in the latest third quarter, even though it has stemmed its losses, by parts, through saving up on marketing expenses. However, with the drop in marketing, its revenue growth rate has dropped too. While sales plunged 32% in the third quarter, things seemed lackluster to shareholders, who had bought shares based on the hyper growth rates initially.
The facts that Groupon missed its own prediction and its expansion into European boundaries has underperformed are more problematic.
Groupon’s primary daily deal business depends on getting interesting offers from local businesses like spas, restaurants, hair salon and the like, offering them to an enormous email list of subscribers. However, some minor businesses have accused of losing on money when offer Groupons, since they get inundated with customers or face other bad experiences. They become reluctant in offering them again.
It was in last May when MIT Sloan Management Review mentioned how a disappointingly designed coupon campaign can have an effect on the profit margins of small businesses.
Additionally, Groupon uses some of the cash payments from its customers to pay preceding vendors that instigated some analysts to liken the business model offered by the company to a pyramid format.
Groupon has developed a big brand no doubt but the question is, is it an important one? Or does it indicate a cheap customer, who would probably never go to a restaurant unless he/she got a discount coupon?