Do Copycats Hurt Groupon’s Business Model?

Do Copycats Hurt Groupon’s Business Model?

If imitation is the highest form of flattery, then daily deal site, Groupon, has been highly complimented by the countless copycat companies that have emerged recently. Could these copycats be eroding Groupon’s business model? Perhaps. But, by continuing to differentiate itself and adapt to the competition, Groupon could continue to lead in what has become a rapidly growing industry.

Launched in 2008, Groupon is every bargain hunter’s dream. By emailing its subscribers information about heavily discounted coupons for local restaurants, theaters, events and more, Groupon has grown into a daily deal industry giant. The company takes a cut of the profits and in exchange, the local business offering the deal receives exposure and one hopes, business. The company has been wildly successful with more than 7,000 employees and a presence in hundreds of cities across the country and around the world. In fact, Groupon recently filed to go public with an expected value of $20 billion.

The problem is the nearly 300 knock off companies that are looking to cash in on the daily deal frenzy. With slightly different tweaks, these companies seem to be crowding in on Groupon’s domination of the industry. For instance, one complaint from Groupon’s merchants has been the lack of customer loyalty. In Boston, a company called Level Up aims to capitalize on this discontent by offering subscribers a series of three deals, each one better than the one before. Also distracting Groupon from its success is the dozen or so federal court lawsuits that are springing up across the country questioning the company’s legality in the way it conducts its business.

These troubles, however, don’t seem to be deterring investors. Nor is Groupon waiting to be taken down by copycat competitors. In fact, Groupon has been doing much to adapt to the ever changing and growing industry. Recently, the Chicago-based company teamed up with online travel agency Expedia to provide discounted getaway vacations in prime locations around the world. And Groupon also recently unveiled Groupon Now, a feature that offers consumers deals on demand.

To stay on top,Groupon would do well to take further measures to protect its brand. The company would also benefit from continuing to keep in mind the swelling merchant discontent about the lack of repeat business among the purchasers of the coupons. Additionally, Groupon should continue to find innovative ways to meet the needs of its customers and overcome further challenges by continuing to track what works does and does not work in the daily deal industry as a whole. It should continue to differentiate itself among the competition. But most of all, find ways to offer the best deals. Period.

Will Groupon succeed? For the foreseeable future, Groupon copycats do not look to be significant threats. The more important question should be is the daily deal industry as a whole here to stay? Or is it a flash in the pan kind of fad that will fade in a year or so? Could this in fact be the beginning of a 21st century dotcom disaster?

This post was written by Ginny Justice


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