The Problem Isn’t The CEO: Groupon Inc (GRPN), Overstock.com, Inc. (OSTK)

In fact, Overstock.com, Inc. (NASDAQ:OSTK), among others, has been successfully functioning as a liquidator for years. While Overstock.com, Inc. (NASDAQ:OSTK)’s top line has been heading up fairly consistently, earnings have been far more volatile. While the inherent benefits of using the distribution power of the Internet are strong, that hasn’t yet translated into a stable business model. As such, Overstock.com, Inc. (NASDAQ:OSTK) isn’t a good choice for most investors.

Bigger Players

Deal-a-day competition is also important to keep in mind. While Living Social is Groupon’s main competitor, there are bigger fish in these waters. For example, Amazon.com, Inc. (NASDAQ:AMZN), which has a stake in Living Social, has its own branded offering, Amazon Local. Google Inc (NASDAQ:GOOG) also has a deal site that includes liquidation sales.

While Groupon quickly built buzz around its name, Amazon and Google clearly have more impressive pedigrees. Google may just be testing the waters, something it does quite often with new ideas, but Amazon is a retail powerhouse that isn’t going anywhere. Indeed, Groupon is financially strong, but probably not strong enough to take on these two industry giants.

To give scope to the size differential, Groupon had revenue of about $640 million in the just ended quarter, Amazon had revenue of $21 billion in the same quarter. Groupon is small fry. Amazon can afford to keep the pressure up to make life difficult for a competitor and slowly build yet another business as it goes. Although a recent sell off is notable, it is just a blip in the long-term advance the shares have seen. More aggressive investors would be better off in Amazon than Groupon Inc (NASDAQ:GRPN).

Avoid the Buzz

Not every good idea is a long-term winner for the company that came up with it. The deal-a-day concept is great, but too easy for others to exploit. A shift into an already crowded retail market isn’t likely to be any better of a direction. The removal of a controversial CEO doesn’t change the bigger problems the company faces. Most investors should simply avoid Groupon.

The article The Problem Isn’t The CEO originally appeared on Fool.com and is written by Reuben Gregg Brewer.

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