The pundits have been critical, and the competitors have been multiplying in number, but Groupon is still sitting atop the pile in the daily deals space. For consumers, the service is attractive for the simple fact that they don’t have to pay to use it, and can actually save money on the things they want to buy by taking the company up on its deals.
The bargain component is obviously its claim to fame, but what if Groupon decided to take a different approach? What if it started charging people to use the service? A lot of things could change, and not all for the good.
Believe it or not, but at one time some critics were calling Groupon a Ponzi scheme. That was all proved to be wrong of course, and we all know it is indeed a legitimate company, one that is now publicly traded. However, one thing that still comes into question is the viability of its business model.
While Groupon gets roughly 50% of every deal between merchant and consumer, many experts believe it is only a matter of time before the service peaks and the financial foundation beneath it collapses. Even charging customers a mere fee of $1 per month could help the company increase its revenue substantially and possibly put some of those sustainability questions to rest. Perhaps the real question is whether customers will go for it.
So let’s say Groupon does decide to charge customers as little as $1 a month to use the service. That certainly would not create a situation where you could say consumers are being raked over the coals, but it could lead to some resistance from the user base. Like we said, the free element is a big part of Groupon’s appeal, and even a fee as low as $1 introduces a barrier that some people may now think twice about crossing.
It might be different if the service was widely viewed as a platform consumers could use to enjoy value-added incentives such as generous loyalty rewards. Though individual brands have conducted their own reward programs through Groupon, that is not the case, so charging a fee out of the blue might literally be a hard sell.
The Future of Groupon
Groupon was able to raise $700 million through its initial public offering last year. The IPO turned out to be the biggest of any U.S.-based internet company since Google went public in 2004. Despite a successful IPO, the instability of the company’s shares on the stock market and continued difficulty bringing in profits has led some spectators to believe that we could see the collapse of Groupon sooner than later.
Would charging for its service help Groupon solve its financial woes? Possibly, but it could also attribute to what critics have cited as an inevitable downfall.