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List of Partners vendors. The company connects customers with local commerce, primarily by selling vouchers and coupons for discounts to brick-and-mortar businesses. In this sense, Groupon generates revenue by using one of the oldest business models around: being the middleman.
The company generates both product and service revenue in three categories: Local, Goods, and Travel. Groupon was launched in Nov. The company went through an IPO in , but since that time revenues have frequently been in decline as a result of increased competition and the struggle to maintain popularity with consumers.
More recently, Groupon has shifted its business model away from a voucher-based approach toward a card-linking one, wherein a customer receives cash back after using a specified linked credit card to complete a purchase of a product advertised on the Groupon platform.
In its financial statements, Groupon identifies two types of income: gross billings and revenue. The gross billings number is the total income from the sale of goods and services, excluding taxes and refunds. Revenue represents the sum of transactions where Groupon acted as a marketplace minus the portion of the service or product provider.
The company also receives direct revenue from sales of merchandise inventory via its online marketplaces. For the year ending Dec.
The company reported an active customer base of Groupon sells a variety of products at deep discounts, including fashion and beauty items, vacation packages, spa services, and gift certificates to bars and restaurants. Though consumers can quite easily purchase the same products directly from the businesses offering them, Groupon often offers prices far below retail.
Essentially, Groupon serves as a powerful advertising engine, generating sales and stronger brand recognition for the business in exchange for a fee. Though businesses receive less for goods and services than they would normally charge, Groupon serves as an advertiser with enormous reach, and merchants also benefit by not having to pay for the advertisement upfront. Rather, they pay a split of revenue earned based on the deal with Groupon afterward. Groupon appeals to business owners by promising to increase foot traffic and guaranteeing a certain amount of income.
When the service first launched, Groupon deals didn't become effective until a certain number of people sign up, so participating businesses knew that they have a minimum number of customers coming in. With the advent of card-linking deals in , Groupon has enrolled close to seven million credit cards as of its last annual report.
The new system aims to make the process smoother for the customer; consumers may be more likely to take advantage of multiple card-linked offerings than they would a series of individual coupon vouchers.
Further, card-linked deals allow customers to not pay until the point of service and to utilize the same deal multiple times, features that were not available with the older voucher model. Consumer trust in the wisdom of crowds may be the reason group buying sites like WagJag, Groupon, LivingSocial and Dealfind have surged in popularity.
The study explores why consumers eagerly participate in group buying now, when a number of group buying sites failed ten years ago. Ming Hu, who co-wrote the study with Prof. The older failed websites like Mercata and MobShop deterred consumers from signing up by leaving them hanging for days before confirming enough people signed up to make the deal a success.
Consumers felt like it wasted their time, giving the deal a high opportunity cost. But by simply displaying the number of people signed up for a deal, it eliminates uncertainty for purchasers coming to the deal later. Early consumers get a boost in confidence because they can track the popularity of the deal afterwards. Some exclusions may apply.
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