View
465
Download
0
Category
Preview:
DESCRIPTION
Presentation on daily deals sites for undergraduates at University of Kent.
Citation preview
GROUPON & THE DAILY DEALS PHENOMENON
Prepared by Barry Holloway for students at the University of Kent
November 2011
Monday, 28 January 13
A BIT ABOUT ME
Monday, 28 January 13
WHAT IS A DAILY DEALS SITE? WHICH ONES HAVE YOU HEARD OF?
Monday, 28 January 13
GROUPON IN THE NEWS
IPO earlier this month
Monday, 28 January 13
HOW WOULD YOU SPEND £100,000?
•Buy shares in Groupon - you get any increase in value
• Start your own Daily Deals site - you get profits / cash if the business is sold
• Put it in the bank - you get the interest
Monday, 28 January 13
WHAT ARE DAILY DEALS SITES?
Define the business as the need it fulfils for :
•merchants
• customers
Monday, 28 January 13
WHAT ARE DAILY DEALS SITES?
Daily deals sites are marketplaces - bringing merchants and customers together, enabling:
• merchants to sell excess inventory and acquire new customers cost effectively
• customers to save money and discover new products, services and brands
Monday, 28 January 13
WHY IS GROUPON SO VALUABLE?
Compare to other online marketplaces that bring buyers and sellers together:
• eBay
Monday, 28 January 13
THE GROUPON STORY
• Started as a group activism site (ThePoint.com) in 2007
• Raised $30m in 2009
• Covers 54 cities by April 2010 and has sold 4 million Groupons - raise another $135m (value has gone up fourfold in three months!)
• May 2010 - buys CityDeal - biggest daily deals company in Europe
• August 2010 - Gap offer sells 400,000 in one day
• December 2010 - Groupon turns down $6bn offer from Google and raises another $950m, with $345m going to directors
• Feb 2011 - runs controversial ad during the Superbowl
• June 2011 - announces IPO
Source: TechCrunch
Monday, 28 January 13
GROUPON HYPE: PR MASTERCLASS
• Groupon’s growth was extraordinary
• The PR story was even better...
Monday, 28 January 13
GROUPON CUSTOMER BASE
• A registrant is someone who has registered, but may not have bought anything
• The 2011 figure is for the end of March
0
22,500,000
45,000,000
67,500,000
90,000,000
2009 2010 2011
Cumulative registrants
Source: Groupon IPO prospectus
Monday, 28 January 13
BUYERS AND SALES UNITS
•Only 1 in 5 registrants ever buy
• Those who do buy more than once on average
• Groupon makes $10 per sale in commission = $270million in Q1 2011
0
7,500,000
15,000,000
22,500,000
30,000,000
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Buyers Sales Units
Source: Groupon IPO prospectus
Monday, 28 January 13
WHAT’S THE HURRY?
Groupon is spending vast sums to grow quickly
Why?
Monday, 28 January 13
WHAT’S THE HURRY?
The market leader gets the highest margins...
... and biggest valuation
A copycat could overtake them
Google and Facebook are a major threat
Monday, 28 January 13
ATTACK OF THE CLONES
There are Groupon clones all over the world
For example, in the US there are around 370 copycats and there are over 1,700 in Brazil
Why?
Monday, 28 January 13
ATTACK OF THE CLONES
• The next big thing - huge buzz and take-up
• Huge valuations being talked about
• Easy to copy - low barriers to entry
Monday, 28 January 13
HOW TO BUILD YOUR OWN GROUPON CLONE
• Choose market location
• Build technology: content-managed deals platform, customer database, CRM, payment systems, anti-fraud system, reporting, invoicing, customer support
(or buy off-the-shelf)
• Hire sales team
• Acquire customers
Monday, 28 January 13
THE CHICKEN AND EGG SYNDROME
Having great offers is clearly vital, but:
• How do you get merchants to give you great deals when your customer base is tiny?
• How do you get customers to sign up if your offers are poor?
Monday, 28 January 13
THE CHICKEN AND EGG SYNDROME
In order to escape chicken and egg, companies:
• Offer initial merchants very low commission
• Increase their marketing spend
• Run welcome offers - often at a loss
Monday, 28 January 13
THE BUSINESS MODEL
Monday, 28 January 13
THE BUSINESS MODEL
Monday, 28 January 13
THE BUSINESS MODEL
Monday, 28 January 13
GROUPON’S PERFORMANCE
2008 2009 2010
Commission $0.005m $11m $280m
Source: Groupon IPO prospectus
Monday, 28 January 13
GROUPON’S PERFORMANCE
2008 2009 2010
Commission $0.005m $10.9m $279.9m
- Cost of sales $0.163m $4.5m $263.2m
e= Gross profit - $0.158m $6.4m $16.7m
Source: Groupon IPO prospectus
Monday, 28 January 13
GROUPON’S PERFORMANCE
2008 2009 2010
Commission $0.005m $10.9m $279.9m
Cost of sales $0.163m $4.5m $263.2m
Gross profit - $0.158m $6.4m $16.7m
- Operating costs $1.6m $12m $700.3m
e= Operating loss - $1.7m - $5.6m - $683.5m
Source: Groupon IPO prospectus
Monday, 28 January 13
THE BIG GAMBLE - REPEAT SALES
Groupon will only become profitable if customers carry on buying
Monday, 28 January 13
THE BIG GAMBLE - REPEAT SALES
1st quarter 1st year
Commission per registrant $3.46
Cost of sale per registrant $4.86
Gross profit -$1.40
Source: Groupon IPO prospectus
Monday, 28 January 13
THE BIG GAMBLE - REPEAT SALES
1st quarter 1st year
Commission per registrant $3.46 $16.68
Cost of sale per registrant $4.86 $4.86
Gross profit -$1.40 $11.81
Source: Groupon IPO prospectus
Monday, 28 January 13
THE BIG GAMBLE - REPEAT SALES
BUT:
•Operating cost per registrant in 2010 was $13.84
• Increased competition is forcing marketing costs up
• and commission rates down
Monday, 28 January 13
ARE DAILY DEALS SITES DOING ENOUGH FOR THEIR CUSTOMERS TO
GUARANTEE REPEAT SALES?
Daily deals sites are marketplaces - bringing merchants and customers together, enabling:
• merchants to sell excess inventory and acquire new customers cost effectively
• customers to save money and discover new products, services and brands
Monday, 28 January 13
HOW DO YOU SUCCEED IN A CROWDED MARKET?
• Be different
• Build a sustainable competitive advantage
Monday, 28 January 13
SO, HOW WOULD YOU SPEND £100,000?
•Buy shares in Groupon - you get any increase in value
• Start your own Daily Deals site - you get profits / cash if the business is sold
• Put it in the bank - you get the interest
Monday, 28 January 13
THANKS
Monday, 28 January 13
Recommended