Groupon Sales Team Files Class-Action Suit

http://paidcontent.org/article/419-more-bad-news-for-groupon-sales-team-files-class-action-suit/

by hunterowens • 15 years ago

128 67 15 years ago

suking3• 15 years ago

Almost starting to feel bad for Groupon - what else could possibly go wrong? The only thing that seems left is insolvency.

ams61102• 15 years ago

There has GOT to be a great case study there once all the dust/ashes settle.

suking3• 15 years ago

"How To Almost Go Public By Making 50 cents for every $1 spent." - HBS Case (2012)

Koldark• 15 years ago

Shit meet fan.

hop2• 15 years ago

A side note - I have been supremely impressed with Groupon's customer service. Emails personally returned within minutes and no problem refunding groupons I no longer wanted.

waterside81• 15 years ago

As a business featured a few times on Groupon, our merchant contact at Groupon has been ridiculously good. She (hi Emily!) answers emails at all hours of the day. It's part of the reason why I've always rooted for them, their sales team seem to be good, hard working people.

gojomo2• 15 years ago

My experience has been the opposite. Despite the fact that this blog post from Mason...

http://www.groupon.com/blog/cities/groupon-organizes-class-a...

...suggests that Groupon's "completely open return policy" can be used, rather than a lawsuit, to get a refund on an expired Groupon, that's not true. They won't give such refunds, and their customer service responses have advised that the Groupon in question may still be usable "if state law applies". So rather than providing "unbelievable" customer service, or even following through on the refund promises of their CEO, they're doing the absolute minimum required by law.

So in the single interaction where I could independently test whether what Mason touts is true, it was not. As a result, I don't put much weight in anything Groupon claims.

hop2• 15 years ago

Well they just refunded my 4 helicopter ride Groupons for a total of $596 that would have expired next week. If I let a Groupon expire though, I wouldn't bitch about not getting a refund, no matter the state law.

dkokelley• 15 years ago

I never really understood Groupon's super high valuation. I think they grew too fast, and possibly needed to cut corners to sustain their growth. Can anyone explain what the appeal has been for investors?

pyre• 15 years ago

My take is that the appeal to investors has been to 'ride the wave' and make sure not to be the last one holding the bag.

jinushaun• 15 years ago

Me neither. They are in a commodity market with a low barrier to entry. They had dozens of other competitors, but had no secret sauce nor was Groupon any better than them. Even a basic Twitter search for deals is better than Groupon--nevermind paper coupons. The CEO should've taken the Google offer and run with the money. I don't understand why investors were gaga over it.

jonnathanson2• 15 years ago

"Can anyone explain what the appeal has been for investors?"

The usual shtick about how growth trumps all other considerations. "It's the fastest growing company ever!" "Who cares if COGS is absurdly high / users aren't buying / revenues have been overstated / etc? Fundamentals don't apply when they're growing this quickly!" "This is a winner-take-all market, like with Amazon in the 90s!"

I remember reading endless defenses of Groupon's business model on SeekingAlpha in the months leading up to the IPO filing. People would trot out all sorts of highly sophisticated models and theories to demonstrate how Groupon was pretty much exempt from the laws of thermodynamics. I'm too young to remember if the same pitch was used for the Dotcoms of the '90s bubble, but the logic sounds eerily familiar.

joe_the_user• 15 years ago

But there was also other shtick...

"They've solved a problem that no one else was able to solve ... how to go that last mile to the merchant"

And

"They've assembled a team like no one else [implication they can pivot if necessary]"

And

"Anything done by [supposed-superstar-manager] is worth a lot"

And naturally, all this was wrong-headed. The retail sector as a generic is pushed to the boards in this economy. The idea that you can squeeze excess capacity for profits is simply false given that no industry has ever attained economies of scale without building for it from the ground-up. Blood? Stone? You cannot squeeze...

TL;DR; You could say Groupon was built on looking at plans that worked for sky diving businesses and pretending they'd apply to restaurants.

larrys3• 15 years ago

"This is a winner-take-all market, like with Amazon in the 90s!"

Amazon is often pointed to as a company that was doubted much and then succeeded. What isn't talked about as much, in addition to the fact that there were many more companies that went bust than hit, is the fact that Amazon lost 3 billion before it became profitable. (Source: financials on Amazon investor site). The fact is Amazon should have failed and the critics were right more than they were wrong.

"I'm too young to remember if the same pitch was used for the Dotcoms of the '90s bubble"

Same idea. Making people think they are stupid if they don't "get it". I know otherwise smart people who lost $100,000 on dot com stocks that they had no business in back then.

johnbatch• 15 years ago

They should have taken that google offer.

sek• 15 years ago

I wonder if they couldn't, what if Google took the offer back after they saw their financials.

felipemnoa• 15 years ago

I'd wager it was something in that neighborhood. Either google withdrew the offer or groupon knew that google would not go ahead with the offer after seeing their financials and hence decided to decline it. The offer however made them seem really hot though. Hey, if google wants them why shouldn't we regular folks?

gravitronic• 15 years ago

too bad it only lasted one day...

aresant• 15 years ago

Interesting tidbit from the article that I did not know:

"a federal judge in San Francisco permitted a tour operator to proceed with a merchant class action lawsuit over alleged false advertising"

leads to

http://www.reuters.com/article/2011/08/24/us-groupon-lawsuit...

mdoerneman• 15 years ago

I see Groupon's rise and fall as similar to MySpace. traffic for rival deal site Living Social rose 27% Maybe Living Social is the Facebook in this comparison.

enjo• 15 years ago

In my world it definitely is. They are MUCH more local for those of us living in the city (Denver in this case) than Groupon which typically has deals that are 20 miles from my house.

For me and my social circle, Living Social is something we consistently use. Most people I know have actually unsubscribed from Groupons mailing list.

Anecdotal for sure, but I think there might be at least a kernel of trend in there somewhere:)

r00fus• 15 years ago

This brings up an interesting point. Perhaps hyper-locality (ie, zipcode or even neighborhood granualar offers) is the full-paradigm shift that will revolutionize this Groupon concept.

Social sizzle like what LivingSocial adds I think is nice, but forgettable (no one I know has gotten/used the "free deal" group buy).

lhnn2• 15 years ago

My spidey senses are tingling that this is some sort of sabotage... too many things are falling apart too quickly.

lhnn2• 15 years ago

So much for " (-1, Disagree)"

VladRussian• 15 years ago

a boom needs a webvan

jtap• 15 years ago

This is really sad. In my limited understanding of business, I always thought that Groupon's greatest asset was it's sales team. Who else has a sales team that can hit so many small businesses across the us so fast. I was hoping that they would leverage this asset in more ways than just selling advertisement.

byrneseyeview• 15 years ago

suddenly unpopular with both users and investors...

The first rule of bad journalism is to confuse the first and second derivatives. Groupon is enormously popular with users and investors--it's just not the most popular it's ever been. Yipit's fairly recent data indicate that while the daily deal market contracted slightly over the summer, but Groupon shrank more slowly than LivingSocial ( http://techcrunch.com/2011/08/25/yipits-daily-deal-report-gr... ).

In "Fooled by Randomness," Taleb points out that the more frequently you measure results, the more random they are. Second-by-second, Warren Buffett is losing money just about half the time.

Groupon obviously has problems, and LivingSocial is executing amazingly well, but it should be laughable to call them "unpopular" rather than "less massively popular than at their peak a couple months ago," in the same way that you wouldn't call someone "poor" because they moved down a spot in the Forbes 400.

andrewljohnson• 15 years ago

I upvoted your comment, but I still think you might be wrong.

The journalist may be sensationalizing here, but a high-growth, pre-IPO start-up that is contracting, before it begins to exploit profits, is in trouble.

Whether it's the market or the company that is in trouble, or a mixture of the two, is debatable. But I do think "suddenly unpopular" conveys the gist of the story better than "contracting from its previous peak." The first tells me something is wrong in Groupon world (and there probably is), and the second tries to convince me the whole thing is a non-story.

jonnathanson2• 15 years ago

I think the word "unpopular," in the context of the article, is referring to people's perceptions of the company's business practices and brand. Not so much to the size or engagement of the userbase. I might be wrong, but that was my interpretation.

(It's "unpopular" right now because it's come under a lot of heat in the press; perhaps "embattled" would be a more accurate word).

hammerdr• 15 years ago

And neither would be accurate. Most users, both businesses and customers, are wildly happy with group on.

msellout• 15 years ago

I like Taleb, but I think you've misinterpreted him. High-frequency measurements of a random variable will reveal more about the probability distribution than will infrequent measurements. As far as I know financial time-series are scale-invariant. While infrequent measurement may take advantage of the law of large numbers in identifying the mean, frequent measurement will allow observation of both the mean and the variance of the distribution.

candre717• 15 years ago

Poor business fundamentals create poor business outcomes. Groupon needs to reevaluate itself, and if it must, downsize and regrow with a better product. Basically, Groupon needs to figure this out - or everyone else will - and it won't be good for Groupon.

ChuckMcM• 15 years ago

This had to be sort of expected. Groupon has grown fast and they turned down the acquisition offer from Google. This suggests that they were messaging new employees "We're taking this one all the way to IPO." And then proceed to ply new employees with stock and spreadsheets showing great returns. Many people at a 'startup' understand that they are sacrificing a bit of pay or benefits now, for a potentially much larger upside later. And Groupon certainly fit the mold.

Now Groupon pulls back on their IPO plans, folks who had been "taking one for the company" feel cheated because they have a harder time imagining huge returns than they did before. (On a related note I've had this issue with calling options and stock 'compensation' in the past because really until someone buys your paper it really isn't something you can spend) So the sales folks turn around and say well if we're not going to get that money we foolishly believed would be dripping out of the IPO spigot, they're going to ask for it in cash.

I really wonder if they would have crossed this threshold (suing) if the 'big cheeses' in the company hadn't decided to do a huge funding round to pay themselves off. (another way to convert 'potential' in earnings into cash).

gyardley• 15 years ago

Completely misleading title - it should read 'Groupon Salesperson Files Class-Action Suit'. You only need one person to file a lawsuit, class-action or otherwise, and there's no indication in any of the docs that any other members of Groupon's sales team are involved.

From the filing (in Justia - http://docs.justia.com/cases/federal/district-courts/illinoi...) it looks to my completely-not-an-expert-eyes like Groupon's mistake here was not treating its salaried employees like salaried employees - on rare occasions it gave them overtime pay, and on the attached pay stub hours and an hourly rate ($15.62) are clearly recorded. Whoops.

tptacek8• 15 years ago

If that's true, it's a pretty common error. Most tech companies operate under the (usually valid) assumption that their employees are all salaried and exempt from OT comp. But it's usually to the benefit of all those employees to be classified "hourly", and theres a bunch of innocuous things employers can do to make that happen.

More common than breaking people's status with overtime payments: threatening to dock pay for coming in late or missing days.

tedunangst5• 15 years ago

California, a few years ago, cracked down on this. Entry level programmers are not exempt. I think because they lack responsibility or skill or somesuch. I found this out only when I had to start filling out time sheets. I became exempt again after a raise, apparently there's some salary floor at which point they assume you have to have responsibility because you're paid too much not to.

FWIW, CA appears to exempt outside sales but not inside sales, so probably all groupon salespeople in CA have a case.

ltamake• 15 years ago

> In a filing in Chicago federal court this week, former salesperson Ranita Dailey confirmed she will be lead plaintiff on behalf of Groupon employees who seek to recoup overtime that the company allegedly failed to pay.

Just because she's the lead plantiff doesn't mean the others aren't involved.

tptacek8• 15 years ago

(i) Sales staff are usually salaried exempt. I would be interested in a specific counterexample (ie, "inside sales at Airbnb is non-exempt!").

(ii) As a result, OT compensation for sales staff is usually zero.

(iii) This filing claims Groupon paid OT comp in the past. That was probably dumb. They don't have to.

(iv) By doing that, they created a basis for sales staff to argue that they were in fact non-exempt. But see (i): the expectation among sales professionals is that they are exempt.

(v) The other specific complaint in this filing is that Groupon didn't include commissions (variable comp) in the calculation for time-and-a-half overtime. In other words, they paid time-and-a-half overtime, which (see (iii)) they didn't need to do, but didn't do it to someone's satisfaction.

How legit does this case seem to you? It looks like a gotcha case over FLSA status. You think the whole sales team signed on for that?

I'm not saying they're going to lose (it'll probably settle out). But does the core issue in here really seem legit to you? It doesn't to me.

auston• 15 years ago

To summarize the situation (someone please correct me if I am wrong?):

1. Files for IPO

2. ASCOI (Adjusted Segmented Consolidated Operating Income) falls under scrutiny from public & SEC

3. VP of Global Communications resigns

4. Internal Memo "leaked" to major press outlets

5. SEC investigates said memo

6. Sales Team files Class-Action suit

Wow.

suking3• 15 years ago

They're on a roll.

blantonl• 15 years ago

7. Cancels IPO

8. Insolvent in 6 months

9. Layoffs

10. Lawsuits

adnam• 15 years ago

The turning point for Groupon was that awful, offensive Superbowl advertisment.

divvlr• 15 years ago

I would recommend to groupon instead of forcing businesses to give deals. Set up a system that has the users bid to spend a certain amount for a good or service. Once you have enough people agreeing to it, there's no way a business would turn it down. You could cut the work force in half and let the users have control of where they get deals. That's my 2 cents.

Groupon Sales Team Files Class-Action Suit

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