Having recently subscribed to Groupon during the summer, I was intrigued by the concept behind these newly emerging “deal-of-the-day” businesses – specifically, the profit-maximization strategy behind consumers carrying out online payments, but redeeming their purchases in real-world stores.
According to an article by TechCruch, “Groupon has been able to grow high-margin revenues faster than almost any other company in the history of the Internet”. The question I pondered on while reading through this article was, “Why are these deal-of-the-day ecommerce business models so successful?
After thinking for some time, I have come to the following conclusion: this branch of e-commerce has no inventory, low overhead, well, relatively low overhead, and a highly attractive commodity that is appealing to a wide audience of consumers. High rewards are coming at a cheap price tag for Groupon, and so I am not surprised that other firms are quickly diving into the daily deals industry with hopes of reaping the same rewards.
