Skip to main content
Sister Publication Links
  • Automotive News
  • Rubber News
  • European Rubber Journal
Subscribe
  • Login
  • Register
  • Subscribe
  • Current Issue
  • HUMANITARIAN
  • News
    • TIRE MAKERS
    • COMMERCIAL TIRE
    • GOVERNMENT & LAW
    • MERGERS & ACQUISITIONS
    • BEST PLACES TO WORK
    • OBITUARIES
    • OPINION
    • MID YEAR REPORT
    • SERVICE ZONE
  • ADAS
  • Data
    • DATA STORE
  • Custom
    • SPONSORED CONTENT
  • Resources
    • Events
    • DIRECTORY
    • CLASSIFIEDS
    • SHOP FLOOR
    • AWARDS
    • ASK THE EXPERT
    • LIVESTREAMS
    • WEBINARS
    • SEMA LIVESTREAMS
    • RUBBER NEWS EVENTS
    • BALANCING
    • DEMOUNTING
    • SAFETY
    • TIRE REPAIR
    • TPMS
    • TRAINING
    • VEHICLE LIFTING
    • WHEEL TORQUE
    • Best Places to Work
  • ADVERTISE
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. News
June 10, 2013 02:00 AM

Call it Groupon 3.0: Deals giant on a mobile mission

Crain News Service
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    By John Pletz, Crain News Service

    CHICAGO (June 10, 2013) — Groupon Inc. is setting its sights on a bigger goal than being the king of daily deals — it wants to be a mobile-commerce giant, too.

    Shareholders are likely to hear a lot more about this idea—which Groupon execs have been laying out for investors and Wall Street analysts lately—when they gather June 13 for the company's annual meeting in downtown Chicago.

    In the 18 months since it went public, Groupon has morphed beyond its roots of emailing local deals on food and manicures to offering discounts on merchandise from mattresses to watches to auto service. Groupon said nearly half the sales in its core North American business are done on mobile devices, and it could be the first big e-commerce player to get the majority of its revenue from mobile.

    "We think we have a great opportunity to be one of those places where people start shopping when they pull out their phone," said Rich Williams, Groupon's senior vice president of marketing.

    Groupon's ability to sell its story—and back it up—will determine whether the company regains its credibility. That's crucial if it hopes to again see, or exceed, its $20 IPO price. Groupon's stock is up off the mat lately as investors seem to have set aside their fears that the company is going under and are at least willing to listen to the pitch from Chairman Eric Lefkofsky and board member Ted Leonsis, who are piloting the company until they find a permanent replacement for ex-CEO Andrew Mason, who was dismissed from the Chicago-based company in February.

    Shares peaked at $7.69 on May 31 and have slipped to $6.94, but they're more than double the Nov. 13 low of $2.63. The IPO price of $20 in November 2011 is a distant memory.

    Groupon's new story requires selling: The narrative is getting more complicated, which is always hard for investors to latch on to. And Groupon's history of over-promising and under-delivering makes investors skeptical.

    Even so, the new vision "sounds good to Wall Street," said Sucharita Mulpuru, a Charlotte, N.C.-based e-commerce analyst at Forrester Research Inc. "They're doing well with mobile, but where does it lead? I feel like we've seen this movie before: Groupon has to walk the talk. Show us what you're going to do."

    There's no doubt mobile commerce is taking off. It's expected to nearly triple by 2017 to about $108.6 billion, according to New York-based researcher eMarketer. However, mobile will account for only about 9 percent of retail spending, Forrester said. And it's unclear whether mobile is adding new business or simply shifting purchases that would have happened via traditional PCs.

    E-commerce giants, such as Amazon Inc. and eBay Inc., already are there, along with traditional retailers such as Sears Holdings Corp. and Best Buy Corp.

    "There's room for more than one or two companies," said Leslie Hand, an analyst at International Data Corp. of Framingham, Mass. "But there's a lot of risk to Groupon thinking they're going to become a major player. They're going to be competing for the same customer with some of the same products with people who have more relationships (with suppliers)."

    Some investors still struggle to understand its commerce business, Groupon Goods. Although it has shown huge growth—revenue more than doubled in the past year—the gross profit margin is one-tenth of the deals business.

    "I like the mobile-meets-local strategy. But investing most of their money in Goods—an overstock business—that's got a lot of risk," said Daniel Ernst, a New York-based analyst at Hudson Square Research. "At some point, they need to build infrastructure, take inventory and potentially compete with their own merchants."

    Groupon argues that e-commerce is a natural extension of its core local-deals business, which remains its focus. "Physical goods are a big part of local retail," Groupon's Mr. Williams said. "There's some opportunity there that's not fully explored yet."

    Merchandise brings plenty of costs and challenges. Groupon has more than 2,000 sales reps and other employees in the former Montgomery Ward catalog center at 600 W. Chicago Ave. It's got 100 people in an office next door, including veterans from eBay, Amazon and Wal-Mart Stores Inc., who are orchestrating the often-tricky logistical ballet needed to run an e-commerce business that sells merchandise nationwide.

    So far, Groupon is outsourcing shipping and warehousing. "Over the next six to eight months we'll continue to evaluate how deeply we need to extend into warehousing and fulfillment," Mr. Williams said. "It's too early to say."

    In the short term, the company has to find a replacement for Faisal Masud, general manager of the Goods business, who recently was recruited by Staples Inc.

    This report appeared in Crain's Chicago Business magazine, a sister publication of Tire Business.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

    Most Popular
    1
    Update: Goodyear agrees to meet investment group
    2
    Mavis acquiring TBC's NTB, Tire Kingdom business
    3
    TBC, Mavis complete deal for NTB, Tire Kingdom stores
    4
    EV owners say OE tires wearing out too soon
    5
    Of raiders and Wingfoots: What's ahead for Goodyear?
    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Newsletter Center

    Staying current is easy with Tire Business delivered straight to your inbox.

    SUBSCRIBE TODAY

    Subscribe to Tire Business

    SUBSCRIBE
    Connect with Us
    • Facebook
    • LinkedIn
    • Twitter
    • Instagram
    • RSS

    Our Mission

    Tire Business is an award-winning publication dedicated to providing the latest news, data and insights into the tire and automotive service industries.

    Reader Services
    • Staff
    • About Us
    • Site Map
    • Industry Sites
    • Order Reprints
    • Customer Service: 877-320-1716
    Partner Sites
    • Rubber News
    • European Rubber Journal
    • Automotive News
    • Plastics News
    • Urethanes Technology
    RESOURCES
    • Advertise
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Media Guide
    • Editorial Calendar
    • Classified Rates
    • Digital Edition
    • Careers
    • Ad Choices Ad Choices
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • HUMANITARIAN
    • News
      • TIRE MAKERS
      • COMMERCIAL TIRE
      • GOVERNMENT & LAW
      • MERGERS & ACQUISITIONS
      • BEST PLACES TO WORK
      • OBITUARIES
      • OPINION
      • MID YEAR REPORT
      • SERVICE ZONE
    • ADAS
    • Data
      • DATA STORE
    • Custom
      • SPONSORED CONTENT
    • Resources
      • Events
        • ASK THE EXPERT
        • LIVESTREAMS
        • WEBINARS
        • SEMA LIVESTREAMS
        • RUBBER NEWS EVENTS
      • DIRECTORY
      • CLASSIFIEDS
      • SHOP FLOOR
        • BALANCING
        • DEMOUNTING
        • SAFETY
        • TIRE REPAIR
        • TPMS
        • TRAINING
        • VEHICLE LIFTING
        • WHEEL TORQUE
      • AWARDS
        • Best Places to Work
    • ADVERTISE
    • DIGITAL EDITION