Earlier this week, Groupon celebrated its fifth birthday — and its party was certainly hard to miss. The countdown to the big day began last week, when my daily deal emails arrived with pomp and circumstance — images of crowns in the subject lines, extra exclamation points in the text, and heavy promotions based on the need to celebrate. On November 4, Groupon gave out $5 million in “Groupon Bucks” to thank its customers for fueling its five-year evolution from daily deal provider to searchable marketplace.
But the party isn't stopping there. The company continues to identify marketplace opportunities and engage its consumers in a seamless, meaningful way. Groupon’s recently redesigned mobile application and website aim to enhance user experience and allow the company to start optimizing its audience potential. Forrester’s Consumer Technographics® data shows that Groupon's US online customers are a particularly valuable target, as they spent around $200 more shopping online in the past three months than the average US online consumer:
“While significant media and investor interest in daily deals has fueled the hype around this business model, data from consumers indicates that daily deals are significantly challenged models.”
The daily deals concept is receiving just as much press coverage in Europe as it is in the US, so with that in mind we have taken a similar look at the state of the market of deals, flash sales and coupons and found that while there is a great deal in common, there are some notable differences.
Much of the differences stem from a combination of the local players and the geographical complexity of operating across Europe. Many of the big players like Grouponand Living Socialare present in Europe, with significant market presence in many countries, though a range of other national companies like DailyDeal.deand SecretSales.comoperate in only one country. So while at a national level the situation is reasonably easy to understand, eBusiness executives operating in a pan-European company have a maze of different options to navigate through.
After months of drama, Groupon finally had its IPO last week, concluding perhaps the most anticipated event in the daily deals space. Now, however, is the even bigger challenge of actually proving out its valuation. The obstacles aren’t small and we lay them out in a report out today called Myths and Truths About Daily Deals. We define daily deals as both the purveyors of prepaid vouchers like Groupon and Living Social as well as the flash sale sites like Gilt Groupe and Woot. Two of the biggest challenges for prepaid voucher companies are the following:
Little incrementality especially for core Groupon businesses like restaurants or even national retailer deals. The majority of consumers who redeem prepaid vouchers (80% in the case of clothing or shoe stores, for instance) were already customers of the brand, and more than half say they would have purchased anyway without the voucher.
Email won’t drive growth moving forward. While Groupon vaunts the size of its “subscriber base” (i.e., email addresses), all evidence points to the medium becoming less important. A significant portion of people who once subscribed to these emails no longer do, and many simply don’t want to because they have no need for more clutter in their inboxes. On the other hand, we’ve heard anecdotally that revenues for these sites are increasingly coming from organic traffic, which can be good so long as a daily deal company can continue to keep its brand top-of-mind for consumers. Marketing and sales, however, are two of the expenses that Groupon has loudly vowed to reduce.