Reimagining: Building a Better Groupon Ecosystem
When the viability of your company is dependent on an ecosystem of smaller businesses…are you a helpful friend or a daunting foe?
As it currently stands, Groupon serves as a platform that links local discounted offers to a variety of buyers. Simple enough — but this core business model unintentionally hurts all parties intertwined in its ecosystem (the consumer, third-party seller and Groupon itself). Groupon’s main value proposition of being a marketplace creates a cycle of mundane transactions that produce seeping holes that slowly sink a small business.
The death spiral of a small business owner by Groupon
Initially, many small businesses enlist to be a part of the Groupon network for advertising purposes. They are provided an easy way to market their product(s) or service(s) to millions of people with the added benefit of minimum upfront costs. Unfortunately, for the unwitting small business owner, this starts to become the beginning of the end.
It’s a vicious cycle — small businesses receive a huge upswing in orders (which is initially satisfying) but the dream quickly unravels as unintended consequences start to rear their ugly heads.
This huge uptick in sales leaves the small business flat footed as they’ll experience growing pains of:
Limited inventory to fulfill orders
Staffing limitations to operate efficiently
Poor customer experience
This is where the problem of Groupon’s current business model lies. Groupon’s growth is dependent on the success of third-party vendors (small businesses that market on Groupon) and satisfaction of consumers who purchase from these sellers. But because of the reasons outlined above, dynamics become negative as sellers grow through the Groupon platform. Due to this relationship, Groupon MUST make a fundamental shift in their business model to create positive outcomes for vendors and a downstream effect that leads to a pleasant experience for consumers.
As vendors grow in sales via Groupon, they experience a double-edged sword. Groupon needs to shift its model to which growth will amplify a better experience than hinder it.
A viable business model — both for itself and third-party vendors — will not come from the current transactions being pushed, but will come from its ability to create an environment in which small business owners can mold their own microcosm within Groupon’s overarching platform.
Molding an environment for small businesses to leverage network effects
The ideal model will allow all parties to build on insights within their connected network.
The current Groupon ecosystem is not an ecosystem at all. It is a linear assembly line with one touch-point for each stakeholder. With only a linear delineation, it is doing an injustice for long-term growth to the small businesses it serves. The future state of the Groupon ecosystem needs to give small businesses the ability to create an amplified network (see ideal model).
It should be the mission of Groupon to provide a foundation network effect for those within its purview. The network should consist of value added features and services from Groupon to all third-party vendors, and all consumers. This network would then facilitate the sharing of consumer data, industry trends, and peer knowledge. If leveraged properly, small businesses will gain a greater ability to target specific demographics, personalize consumer touch-points, gain insights into their current market and leverage knowledge from other industries.
By leveraging all data sets from those within the network, small businesses will have the ability to strategically grow their business.
And if you’re one usually concerned with the bottom line, the power of network effects will increase Groupon’s value exponentially, contain costs and in turn, provide greater returns for the company.
Turning the ideal ecosystem into a reality
Turning this ecosystem into a reality starts with Groupon. Groupon must revamp its current features and services to provide greater value for third-party vendors.
By filling in the gaps that small business owners overlook, Groupon will not only boost sales but build trust among those within their network. Potential services to achieve this goal can include:
By not only acting as a platform for small businesses but also building a trusted, advisory relationship through new services and features, Groupon can increase utility for small businesses, create new revenue streams for itself and provide more value to everyone that is a part of its ecosystem.
A cycle of new hope
With a more specific focus on small business pain-points, third-party vendors who enlist in the Groupon platform would:
obtain better insights into their business and customers
receive advice from peers and build a community
increase sales while becoming operationally efficient
leverage robust data sets to mold their business in current environment
These positive benefits allow small businesses to continually refine their products and services in order to create momentum for the business to obtain repeat customers. By using the Groupon platform to not only attract new customers, but also retain old ones, small businesses will be able to flourish.
With a focus on helping small businesses achieve their goals, Groupon would:
increase volume from small businesses using current service
grow in number of Groupon sold due to the enhancement of the consumer experience
increase revenue through new services
build better relationships with third-party vendors
Through this new business model shift, everyone within the ecosystem benefits. Groupon can obtain repeatable, sustained growth, third-party vendors can leverage the network to drive sales and improve their operations and consumers get a better experience.
Creating a sustainable future
In the end, Groupon’s sustainable success will come from implementing features and services that will build a trusting relationship with its third-party vendors. In turn, vendors will have the opportunity to mold an environment for themselves in which they can create a better customer experience and become better equipped to navigate changing business trends.
Vendors now don’t have to fear or second-guess growth. They can embrace it and become confident that Groupon will act as a helpful friend in their journey. Groupon can now go from one that hurts itself through growth to one that strengthens because of growth. This new dynamic will drive positive externalities for consumers who will reap the rewards of better products, services and experiences.
Disclaimer: Partners in Company is not affiliated with Groupon or any of its third-party vendors. This serves as an op-ed on the company.