The Bankwatch

Tracking the consumer evolution of financial services

This company is the opposite of “do no evil"– Groupon

Its been a while since I wrote about Groupon.  Back then my main issue was their misuse of accounting rules to ignore marketing costs when calculating profits and basically falsify profitability.  They were called out on that by the SEC.  However that might be chicken feed compared to what they are up to now.

Groupon is essentially a sub-prime lender that does zero risk assessment | reDesign

Well, for starters, it’s not a coupon company nor a marketing company. At its core, Groupon’s U.S. business is a receivables factoring business, as I wrote last year. They give loans to small businesses at a very steep rate (the price of the discount plus Groupon’s commission). They get the money to fund these loans from credit card companies such as Chase Paymentech. Groupon is essentially a sub-prime lender that does zero risk assessment. And as word continues to spread about what a terrible deal running a Groupon is for many categories of businesses, the ones that will choose to run Groupons are the ones that are the most desperate. For U.S. based businesses, the only time I can definitely recommend running a Groupon is if it is otherwise going to go out of business.

The nature of Groupon business model is to bring out the worst in business practise and the worst businesses that practise those practices.  This company is the opposite of “do no evil".

Written by Colin Henderson

April 3, 2012 at 22:18

Posted in Uncategorized

%d bloggers like this: