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Groupon’s fortunes grow on basis of strong mobile positioning

June 18, 2013

Groupon’s fortunes are improving thanks almost exclusively to the daily deal site’s increasingly strong performance in mobile.

Last week, Deutsche Bank analysts upgraded Groupon’s stock from hold to buy, pointing to the company’s growing mobile sales and its strong position as a mobile ecommerce merchant. Following the upgrade, Groupon’s shares jumped 12 percent and continued to trade at that level on Monday.

“Groupon has a product which is well suited for the mobile platform, in that it can be provided in a primarily graphic format, rather than a text-based one, which is difficult to use on a mobile device’s small screen,” said David Kaminsky, emerging technologies analyst at Mercator Advisory Group, Maynard, MA. “The mobile platform also enables Groupon to use a consumer’s location to distribute local offers. 

“Other retailers should be sure to optimize their mobile presence for the mobile platform,” he said. “Encourage graphic interfaces rather than text, integrate with other features of the mobile device, such as the GPS locator, the camera or the touch screen. 

“Too many retailers are simply repackaging their Web sites onto a smaller screen, and they are missing out on an opportunity to provide their customers with a unique, customized experience.”

Groupon redux
The jump Groupon’s stock took last week is the biggest it has seen in a few months.

The news is significant because Groupon’s stock has been taking a beating since it went public as concern  has grown over its ability to drive long-term revenue increase once the interest in daily deals began to ebb.

The company has been working diligently to try to remake itself as a broader ecommerce platform with mobile playing a key role.

This includes selling merchandise through its Groupon Goods offering and encouraging users to leverage its app to find local deals when they are out and about as opposed to waiting to receive an email from Groupon with offers that may not be relevant.

Groupon also recently invested in a mobile payments company, SumUp Ltd., as it looks to play a broader role in the mobile commerce ecosystem. Mobile POS is another strategy Groupon is also pursuing.

In the analyst note from Deutsche Bank, Groupon was singled out as the most mobile penetrated ecommerce company that it tracks. The note also forecasts that Groupon’s sales will grow 53 percent to reach a total of $3.56 billion in 2015, driven in part by an increase in mobile sales.

Groupon recently reported that mobile accounted for 45 percent of all of its transactions in North America in the first quarter, up from less than 30 percent during the same period a year ago.

Leveraging location
Helping drive the increase are improvements Groupon has made in helping users of its app search for local deals as well as an increase in the number of local deals it is offering to mobile users.

“By having a mobile-optimized site, they are landing consumers who click through their email promotions on a site tailored to convert this traffic,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston. “They also promote their apps for download on the mobile site, a great idea.

“The app is very good and Groupon excels at leveraging location to deliver the right messaging to consumers predisposed to grab a nearby deal,” he said.

While Groupon’s mobile ecommerce play is getting stronger, it still has a lot of competition.

In terms of overall mobile ecommerce volume, both eBay and Amazon are significantly larger than Groupon. Starbucks is also a significant player here.

On the local deals search front, Groupon’s competitors include Yelp, foursquare and others.

An omnichannel approach
In addition to the competition it faces, Groupon also faces the challenge of waning interest from consumers in  daily deals and special offers.

“The fact that people open emails on their smartphones and access the Groupon mobile site is nothing too noteworthy, especially given that the deals are time-sensitive,” Mr. Kerr said.

“It makes sense that mobile is an effective ‘here and now’ way to convert sales and Groupon is right to put a lot of energy and focus on mobile, but I’d say that analyst was being overly-friendly to Groupon,” he said.

For other merchants, Groupon’s turnaround points the need for a strong mobile strategy as part of an omnichannel approach.

 “Get a mobile site and use this traffic to promote your downloadable apps,” Mr. Kerr said. “Have an integrated, omnichannel approach that delivers an excellent user experience and then turn the tables on location awareness and customization by delivering added value, utility, and functionality, rather than scaring customers away via unwanted push notifications.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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