How Do Groupbuy Website Giant Make Their Money?

shortgum on 04/06/2015 - 02:53
Last edited 04/06/2015 - 02:53

We have make a lot of purchase from their Groupbuying website e.g Groupon, Livingsocial, Scoopon, Ourdeal etc etc.

Especially the popularity of Groupon or maybe Livingsocial that we used almost check every week or everyday even. The deals offered us are quite cheap if you compare how we brainlessly walking in the store or restaurant to pay for the same thing. Even more when they have promo code for 15% or 20% off

So I have not a clue but curiously how the money allocated for their deals. They have been making Millions from their since we have watch news how profitable they are. Where is the revenue coming from then? Is the merchant even making money from this?

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  • CrazyMexican on 04/06/2015 - 04:12
    +1

    I think 15-20% fee to merchant ( so yeah they are paying it ) .. Think of it a bit like ebay …

    • mskeggs on 04/06/2015 - 07:49

      I had heard 30%, but that was a couple of years ago when there was less cut throat competition in the segment.

      • jason101 on 04/06/2015 - 08:00
        +1

        My brother in law ran a promo once with several of the bulk deal providers the commission for his business / offering was 50%

        In many instances the merchants earn nothing apart from the chance of repeat customer business.

        In my bro's example he had a lawn moving business, he did 100+ jobs for next to nothing, but did pick up several "repeat" or contract clients.

  • leetguy101 on 04/06/2015 - 04:44

    Eg,

    You own Lee's Sporting Mart, and you've opened a new store in Brisbane. You notice that the store's a bit quiet. You get together with Groupon, and make a contract for a month - you offer a coupon for NRL jerseys at 30% off, and if you can sell $20000 worth of NRL jerseys, then you pay Groupon 10% commission bringing you $20000 worth of business.

    You both agree, you sell $20000 worth of jerseys, you pay your suppliers $8000 for the jerseys, $6000 for employees and rent, $2000 to Groupon for commission, and your store made $4000 in profit.

    Groupon and all these sites are meant to bring a guaranteed group of customers. The discount on the NRL jerseys is like free ice cream, and Groupon is your megaphone.

  • scotty on 04/06/2015 - 10:41
    +1

    I don't think group buy sites are charging 40%-50% commission anymore — it's a fad afterall and long gone were the days when you have 20-30 group buy sites competing in the same space with new one popping up every month (back in 2010-2011).

    These days they are all moving towards "market place" model, similar to eBay and with multiple concurrent deals rather than the 24 hours one deal a day "group buy" model. For example

    They have been making Millions from their since we have watch news how profitable they are

    It's a good question to ask… Several years ago. I don't think they are doing that well these days. What they do have is millions of email addresses and their past purchase history so I guess these days they'll just milk their database as much as they can.

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