The malpractice of group buying mode is becoming more and more

What is the purpose of the search giant when Google has offered 6 billion dollars to buy Groupon? Where do businesses like Groupon? Groupon is one of the hottest companies in the Internet arena, and the group-buying site offers a daily minimum discount to customers from local businesses. The way it works is that Groupon contacts local businesses and promises that if a merchant offers a low discount on goods or services, it will bring a lot of customers to these businesses.

Groupon, for example, offers 50% of meals coupons to users, but requires the number of participants to reach 1000, which encourages people to share the message and involve friends around them, thereby generating a lot of revenue for Groupon.

Groupon now earns a large profit by taking about 50% of the group's income. Groupon has also funded large sums of money for development and has gained more than 170 million dollars. In the past few months, Groupon has also bought a number of similar Groupon sites around the world, making the site currently covering about 300 cities.

But there is one question to note: Is such a big discount really a good thing for local businesses? For example, if you have a spa that usually costs 100 dollars per massage, is it a good idea to offer 1000 massage services at each price of 25 dollars? Or, if you own a restaurant with a meal of 30 yuan, would it be a good idea to sell 1000 packages at the price of 10 dollars per share?

Merchants have now begun to wonder if Groupon's buying services will really bring them new business, or just bring some people who specialize in finding bargains. How many of the people who get the benefits will return to the restaurant and dine at full price? In fact there won't be many, they will only go to another restaurant to seek a new discount.

A research firm recently surveyed more than 150 merchants who had been involved in Groupon deals. The conclusion is that a larger proportion of restaurants are losing money in group buying deals. This is not surprising because food prices are higher and profits are lower. So lowering the price of video obviously causes losses.

To make it worse, one of the restaurants surveyed said customers who had taken part in Groupon didn't even tip.

Another problem with Groupon's low discount model is that consumers who take part in group buying will think that their previous fees are inflated . If a massage fee can be reduced to 25 dollars, why would it cost 100 dollars before? So how many cheaper people go back and pay 100 dollars for a massage service? Maybe no one will do that.

The problem with Web sites like Groupon is that they only attract customers and don't bring long-term benefits to businesses. It is not an effective long-term business model to attract those "miser" by low discounts.

Of those surveyed, 42% said they would not buy a Groupon-like sale because it was not worth it.

As more and more businesses become smarter and understand the real value of "low discounts", will Groupon and other sites be short-lived? Or will services like Groupon continue to thrive as customers hope to get more customers and revenue?

I think that new and better services will emerge to achieve a better balance between consumers and businesses, and that as online services, mobile services and social shopping become more common, the future of local business models will change rapidly.

Author: Steve Ha,adsense One of the concept creators, this article from the NetEase technology column