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Groupon edges closer to replacing email with mobile as main transaction driver

May 10, 2013

Groupon reported yesterday that 45 percent of its North American transactions in March came from mobile as users increasingly look to the company for local offers when they are on the go.

The company’s business is also evolving away from email as the main driver of transactions. In the first quarter, less than 45 percent of transactions came from e-mail while mobile and search increased as a percentage of total business.

“We see a fundamental consumer shift of consumers who are used to being pushed deals everyday that hopefully will start more and more to come to Groupon and pull down deals that they find when they are out and about,” said Eric Lefkofsky, interim CEO at Groupon, Chicago, during a conference call with analysts to discuss the company’s first quarter results.

“A cornerstone of this is the fact that you are now carrying the power of the PC in your pocket, which is the smartphone and the adoption rates happen to be fantastic, and so Groupon is ideally situated to take advantage of that,” he said.

Making a comeback
Groupon built its fortunes on the daily deals model but has been struggling more recently to reinvigorate its business with a stronger focus on mobile as the daily deals space has become oversaturated.

In a reflection of its troubles, Groupon fired CEO Andrew Mason at the end of February following poor fourth quarter results and a drop in market value, capping off what has been a tough couple of years for the company leading up to and following its November 2011 initial public offering (see story).

“Groupon has a long way to go, as the daily deal fad flamed out almost as fast as it took off,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston.

“Leveraging the power of mobile to help climb out of the hole they are in is a smart move,” he said. “In 2013, eBay expects to do $20 billion in mobile sales because time-sensitive offers are ideally suited for the here and now power of mobile.”

Enhancing search
One important focus of the company has been on leveraging the growth in mobile so that users seek out Groupon via their smartphones when they are out and about to look for nearby deals as opposed to having Groupon push deals out to them that may not be relevant.

With this strategy in mind, Groupon recently added a universal search feature to its iPhone and Android applications to help users sort through the company’s growing inventory of deals. Users can find nearby discounts that are both time-sensitive and on-going (see story).

The company is also building its inventory of available deals. At the time of its IPO, Groupon featured 1,000 deals worldwide and by the end of the first quarter, it featured almost 40,000 deals in North America alone. As a result, over 50 percent of its local transaction volume in North America comes not from new deals that are featured on any given day, but from its inventory of deals.

For example, app users can type in Italian food in Chicago or deep tissue massage in New York to see relevant deals that can be used instantly.

Groupon is also focused on building its ecommerce business Groupon Goods, which sells hard goods, with a portion of the volume coming from mobile shoppers.

The payoff
These strategies appear to be paying off.

Groupon’s mobile transaction volume was 45 percent in March, up from 40 percent a few months earlier. Additionally, the company reported that it had five million downloads of its app in the fourth quarter of 2012 and seven million in the first quarter of 2013.

The company also reports that mobile users buy on average 50 percent more compared to other customers.

While Groupon faces competition in the local deals space from the likes of Yelp and foursquare, Mr. Lefkofsky said during the conference call that the company’s advantage in the space include that it is highly curated and covers a wide array of local categories, it is geocentric, buying and using an offer is easy and it is social.

“People love deals and the here and now immediacy of mobile makes it a perfect medium for taking advantage of limited time offers,” Mr. Kerr said. “As consumers become increasingly comfortable with converting purchases on their smartphones, mobile sales should continue to increase across the board.

“Making it easy for consumers to convert sales via mobile is important too, and Groupon’s mobile site is well-built and integrated with their online checkout systems,” he said. “Groupon is no longer only about cooking classes and spa treatments.

“Groupon Goods and Groupon Getaways are tapping into established models of moving unsold inventory to a wide audience, at discounted rates. If enough mobile consumers bite, it could work out well for all-involved.”

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

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