Groupon Stock Drops 12% As Customer
Refunds Increase
Neil Vidyarthi on April 2, 2012 12:32 PM
While other IPOs such as LinkedIn and
YELP have had tremendous recent success, social buying startup Groupon has been
on a bit of a roller coaster ride and it looks like they just went over a steep
drop. The stock is down over 10% today
on news that four-quarter revenue and income is down due to a higher than
expected number of customers asking for refunds.
Groupon is a social buying service that
allows users to buy specific items at discount as long as a large number of
people participate in a given deal. For
example, a massage parlour can offer 30% off their regular price, as long as
100 people purchase the deal. This
incentivizes users to invite their friends to participate in the deal, and if
the 100 number is hit, the deal is activated.
The problem is that a lot of businesses
have not prepared themselves for the influx of customers, and the poor service
has sometimes led to users demanding refunds.
Another anecdotal reason for the refunds is that the deals are often so
enticing that people begin to hoard massive numbers of deals, but then realize
they probably won’t need to cash in on 6 massages in the next few months. Read more about the refund issue here.
As we can see in the chart, the stock
began to rebound after a big hit in November during the IPO, and had reached
heights above 20. As reported in
MarketWatch, Justin Post of Bank of America/Merrill Lynch had recommended a buy
on the stock, but the company has not performed as well as hoped.
“Groupon has been our most disappointing
call in 2012 as we thought 4Q margin upside, a rebound in 4Q take rates, and
data suggesting an improving competitive landscape would improve sentiment on
the stock,” wrote Justin Post of Bank of America/Merrill Lynch in a note to
clients on Monday.
This is a far cry from when Google was
attempting to buy the company at a valuation of $6B, although today’s does have
its market capitalization at $8B… but that number is falling fast.
Blogger’s Review
Groupon has been seen as a profitable
e-commerce site where it host client discount coupon with a commission. It uses
email as mean of advertisement. Sending newletter to it subscriber on daily
basis.
Goupon issued refund to its patron
mainly due to change of mind and fraudster who is Groupon client who fail to
exercise its duty or promise on the said deal. Online fraud is unevitable even
grouon suffer great loss on this. But for consumer, no doubt Groupon patron has
this conditional privilege-that is the protection in terms of refund to protect
itself, but if these victims were to deal with these online fraudulent without Groupon
as third party, it would be disastrous.
Here is a classic example where
e-commerce merchant could play a row in making cyberspace safer.
References:-
Neil Vidyarthi -2012- Groupon Stock
Drops 12% As Customer Refunds Increase [Online]
[Accessed 2 April 2012 12:32 PM]
