External Environment
Threat of entry – low barriers to entry
Low switching cost for consumers
Low switching cost for merchants
Fierce competition based on territorial expansion
Plentiful substitutes for deals
Consumers use of mobile/digital couponing is increasing
Groupon’s business model is fairly easy to replicate and has quite a few similar competitors that offer discount coupons via online or app-based services. However, what they have going for them is a highly visible brand that is a household name.
The external environmental scan shows that competition is a constant threat because of the relatively low barriers of entry. This makes it even more vital that operations are run as efficiently as possible to maximize growth and profits.
Part of the reason why Groupon needs to be continually scanning and innovating is that buyers/consumers and suppliers can easily switch from one discount coupon service provider to another. There is no commitment or investment on the part of either buyer or merchant. Groupon needs to find ways to make their service more beneficial so that merchants choose Groupon to advertise their products and services. Without a constant supply of new merchants, people will seek deals elsewhere.
More and more people are using mobile coupon and discount apps. Groupon already has one of the largest active customer bases and can continue to grow their reach as new customers access coupon apps.
The number of mobile Groupon app downloads worldwide has been recorded on a quarterly basis since December 2013. In September 2017, over 164 million people had downloaded the Groupon mobile app. As of that period, 69 percent of global Groupon sales were completed via mobile (Statista, 2017).
1
External Environment – Competition
Living Social – offers one deal a day like Groupon
Tippr – same business model as Groupon but offers 3 deals
BuyWithMe – similar model but only offers deals if enough people bought it
Yippit – deals that are city-based
Woot – offers deals that can be purchased from its website, no coupons required
Tanga – deals that are available for a limited time
Ebates – coupons, deals and rebates offered for each purchase
There are plentiful choices for consumers searching for deals, and for merchants searching for this type of advertising.
Listed here are some of the the competitors that Groupon faces. Living Social was a top competitor and Groupon bought them in 2016, effectively gaining around 1 million new users. The other listed companies vary in size and offer deals to its users but in varying ways. The cost of marketing can be quite high – one of the reasons why Living Social had trouble was it didn’t have the budget for marketing (Lunden, 2017).
Even though there is a lot of competition, Groupon’s branding has established it as a household name, and the ease of use of its app downloaded by so many people makes it a first choice for many looking for a deal.
2
