The Daily, Local Deals Market is growing…for Groupon!

The Daily, Local Deals Market is growing...for Groupon!

I finally got a chance to look through Groupon’s quarterly results published earlier this month. Although we make it a point to not publish all that much about Groupon in Canada, (there involvement in the country is not that, well, involved despite their leading sales position in the country), we nevertheless will publish news that we feel impact the industry in Canada.

As such, Groupon’s latest quarterly results showed many positive signs for the company and for the local commerce industry. The company’s local deals business improved in almost every aspect. Here are some highlights:

  • Gross billings in their local deals business grew to $824 million from a low of $677 million in Q3 2012.
  • Of note: this was the first time that local deal revenues grew since the company introduced its Goods business in late 2011.
  • Profits were up and revenue grew from the previous quarter.
  • Commissions from local deals grew back to 40% from 36% in Q4 2012, after decreasing for four consecutive quarters.
  • Groupon’s local deals business also grew internationally.
  • About 45% of Groupon’s transactions in North America now come from mobile.

Groupon is also developing into a destination portal where consumers can visit and shop for local services and online offers whenever they want. This strategy moves away from only counting on email distribution as its main consumer demand practice.

Another key area that Groupon does very well but almost all Canadian providers do poorly is providing local merchants with content, support, data and tools that enable the local merchant to market itself better, to support customers better and to leverage “deal marketing” far more effectively. Groupon has built a very extensive merchant portal that provide merchants with tools of the trade. More and more merchants are seeing Groupon as a marketing partner as opposed to simply a way to advertise deals. That relationship goes a long way in terms of maintaining and increasing local inventory and margins. Canadian Deal providers have a significant lack in this approach and should certainly invest in more merchant content.

While the entire local offers industry seems to be adopting product deals, Groupon is actually realizing that focusing on local offers is far more profitable for them. Yes, product sales will continue to be to a sector of grow for Groupon and continue to reduce their overall margins. However, Groupon will be successful as long as they focus on their true power and advantage: that they are a powerful “Local Commerce” vehicle for local merchants.