We just finished up a Startup Monday meetup and are discussing what will happen to the group buying companies in the coming months.
Here is my take:
1. The cost the consumer expects will trend towards some equilibrium point that doesn't allow margin for the buying site. This is where the red and green lines cross and the blue line is shown.
2. The price that the retailer is willing to offer will trend up, leading to reduced margin for sites.
3. As shown in the chart, any deals above the blue break even line will have margin, anything below will have negative margin.
So, what does this mean? As the two market forces trend, this will push the price toward the no margin or negative margin and will force companies out of the market. It will be an opportunity to innovate or die.
