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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2589

Andrew Mason: departure of a model CEO

Hemantha Abeywardena writes from London …

Andrew Mason, 32, the founder and CEO of Groupon - the website that thrives on coupon - who got fired on Friday, left a distinctly unique footprint on corporate beachfront with utmost humility. Without drowning the shareholders, customers and fans in a sea of ambiguity about his ultimate fate, Mr Mason simply admitted that he was fired – and leaving the company that he founded.

In the internal memo that was addressed to 11000-strong workforce at Groupon, Mr Mason showed that he possessed not only serious business acumen, but also a sense of humour: “After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today. 'If you’re wondering why, you haven’t been paying attention,” said Mr Mason in his memo to his staff.

Mr Mason saw the share price of Groupon plummeting on his watch while being the CEO during the past eighteen months. Mr Mason frankly admitted he was accountable – hardly the stuff that you hear from a CEO when the company runs out of luck.

Despite the personal blow, Mr Mason has provided a global team of entrepreneurs with the inspiration to emulate his business model: Wowcher.uk, mydeal.lk, dealsandyou.com and many more adopted the model in line with their respective local needs; even Amazon.com could not resist embracing Groupon model when they final launched Amazon local deals.

Then, what went wrong for Groupon – and its founder?

It is true that falling sales and profit margin forced Groupon board to ditch Mr Mason in order to appease the stakeholders. Therefore, the new CEO – whoever he may be – has, first of all, to find out why Groupon magic is fading after all.

As far as retailers, who offer their services through Groupon are concerned, the company cut is too big – 40%.

Although, Groupon reduced it by 5% recently, it is still too high for retailers. In addition, there were small scale businesses which just collapsed under the weight of their own Groupon success.

Rachel Brown, a British woman who ran a bakery business for more than 25 years, for instance, was onc such victim. In 2011, she wanted to expand her business a little with a discount deal involving Groupon: Ms Brown, who used to sell 100 cup cakes a month, suddenly was forced to bake over 100,000, thanks to the deal! with a discount of 75% and hiring extra staff to fulfil Groupon obligation, Ms Brown had made a loss of nearly $4.00 from every single order! The misfortune became known as ‘Cupcake Calamity’.

Describing her ordeal in a national newspaper, Ms Brown said it was the worst ever business decision she made; she went on to classify the experience as an “absolute nightmare”. Although, Ms Brown is not entirely innocent in this case, Groupon could have made her aware of the downside of entering into a deal of that kind.

There were quite a few stories in which the small businessmen found themselves swamped by orders which they couldn’t cope with – while making a loss.

It is true that Groupon offered genuine discounts to customers of certain major cities in the UK and elsewhere.

Since people could not look at a deal without giving a valid email address and the city that they live in, those who did so found their email boxes flooding with endless Groupon deals, some of which have no relevance to a particular customer. This was the beginning of Groupon Fatigue – tendency to ignore the emails from the company in bulk.

Having employed over 11000 people purely for sniffing out deals, Groupon failed to use a fraction of them to read the sentiments of its existing customers, when the company started bombarding them with offers without taking into account the individual choices.

With a vantage point of $20 per share, when the company first floated in 2011, Groupon may have been able to hold its head high when no serious competitor was visible on the horizon. Things, however, have changed dramatically since then.

The new CEO of Groupon has to come up with a magic formula to keep the existing customers loyal to its brand name before wooing new ones. Since competition is getting intense by the day, the new boss may have to bring a silver bullet to turn things around for Groupon, especially at a time, when sceptics categorically affirm that the enviable business model is unsustainable in the current form.

- Asian Tribune -

Andrew Mason: departure of a model CEO
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