Groupon Inc. - Daily Deal or Lasting Success?

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Fact #2: Groupon had a total net loss in income every year.

The way Groupon reported their payroll and sales commissions for sales reps, as well as costs associated with supporting the sales technology, telecommunications, and travel for the years 2009-2011 were as selling expenses. They believed that over time they would decrease but in return lead to a $698.7 million in deficit total in 2011. (Wheelen, 2015) In order to decrease the deficit they made the managerial decision in the end not to pay out dividends instead to keep all earnings. In the following year they had seen exceptional growth in revenue. Groupon still had significant increases in cost of revenue and selling expenses. Groupon had then cut cost in marketing spending which lead to the decrease in expenses.

Fact #3: Groupon had to restate earnings for three months to correct an error in its presentation of revenue.

The Securities and Exchange Commission challenged Goupon’s methodology after assumptions and forecasts came under scrutiny. (MERCED, 2012) After revising their financial information it came to show that they failed to set aside enough money to cover customer refunds. The issue caused an increase in the company’s loses by $22.6 million and a report of “material weakness”. (Wheelen, 2015) Mason was voted worst CEO in 2012.

Recommendation:

By making sure that the pressure is taken off the merchants they can rest easier that the development of a stronger merchant relationship. Maybe by offering bigger incentives like a big discount for contracts on new merchants, or taking a smaller percentage rate for themselves they can make and keep new merchants. Groupon could also include and provide sales and marketing techniques to focus on what customers really are looking for as well as to embrace any changes to trends. By accumulating data and information on the millions of customers that they have they can strengthen customer sales by providing products and services that are demanded maybe even adding surveys for customers to fill out.

Groupon expenses are high and even though they have been cutting some expenses they could probably change things in their advertising even engage with customers and let them tell you what kind of deals they are looking for giving the power to the customers to decide some deals. Also by changing the way their management helps with decisions. By allowing them to practice Management By Objective encouraging management to participate. (Wheelen, 2015)

After the errors that were done in the financial reporting that lead to Groupon having to restate 3 months in 2012 showing huge losses I would have restructured the accounting department. Starting with those that have been there since 2010, and replace management since it seems to show that they didn’t know how to keep up with the accounting records. Making sure that all accounting records are correct is vital, so hiring outside the company could benefit. Getting the trust of customers and others is a commitment that needs to be done to succeed an in order for them to start they have to get their finances together and accurate as well as hiring a good accounting team.

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Works Cited

MERCED, M. J. (2012, March 30). DealBook - A Financial News Service of The New York Times. Retrieved from The New York Times: http://dealbook.nytimes.com/2012/03/30/restating-earnings-groupon-discloses-accounting-issues/?_r=0

Wheelen, T. L. (2015). Strategic Management and Business Policy: Globalization, Innovation, and Sustainability. 14th Ed. . Upper Saddle River: Pearson Education.