Groupon

Strong partnerships with great local businesses are at the very heart of Groupon. These partnerships allow us to bring the best experiences and value to our customers, whether they’re looking for new things to try, taste, learn or do. And, by connecting our customers with our merchant partners, we create relationships between loyal, repeat customers and quality local businesses that help communities thrive.

Groupon is an American global e-commerce marketplace connecting subscribers with local merchants by offering activities, travel, goods and services in 15 countries. Based in Chicago, Groupon was launched there in November 2008, launching soon after in Boston, New York City and Toronto. By October 2010, Groupon was available in 150 cities in North America and 100 cities in Europe, Asia and South America, and had 35 million registered users. By the end of March 2015, Groupon served more than 500 cities worldwide, nearly 48.1 million active customers and featured more than 425,000 active deals globally in 48 countries.

The idea for Groupon was created by former CEO and Pittsburg native Andrew Mason. The idea gained the attention of his former employer, Eric Lefkofsky, who provided $1 million in seed money to develop the idea. In April 2010, the company was valued at $1.35 billion. According to a December 2010 report conducted by Groupon’s marketing association and reported in Forbes magazine and the Wall Street Journal, Groupon was “projecting that the company is on pace to make $1 billion in sales faster than any other business, ever.”

History

The idea that would eventually become Groupon was born out of founder Andrew Mason’s frustration trying to cancel a mobile phone contract in 2006. Mason thought that there must be some way to leverage a large number of people’s collective bargaining power. In 2007 Mason launched The Point, a web platform based on the “tipping point” principle that would utilize social media to get people together to accomplish a goal. The Point was intended to organize people around some sort of cause or goal.

It gained only modest traction in Chicago until a group of users decided their cause would be saving money. They wanted to round up people to buy the same product in order to receive a group discount. Founder Eric Lefkofsky wanted the company to pivot in order to focus entirely on group buying. Born from The Point, Groupon was launched in November 2008.

The name for the E-Commerce platform, Groupon is a portmanteau of “group” and “coupon”. Groupon’s first deal was a two-pizzas-for-the-price-of-one offer at Motel Bar, a restaurant on the first floor of its building in Chicago.

The decision to focus on group buying proved wise. In just a year and a half, Groupon grew from a staff of a few dozen to over 350. Revenue and Booking also grew swiftly and the company was valued at over $1 billion after just 16 months in business, the fastest company ever to reach this milestone.

Business Model

When it first launched, the company offered one “Groupon” per day in each of the markets it served. The Groupon worked as an assurance contract using The Point’s platform: if a certain number of people signed up for the offer, then the deal became available to all; if the predetermined minimum was not met, no one got the deal that day. This reduced risk for retailers, who can treat the coupons as quantity discounts as well as sales promotion tools. In the early years before revenue splits began to adjust as necessary, Groupon made money by keeping approximately half the money the customer pays for the coupon. More recently that split could vary depending on many factors.

Unlike classified advertising, the merchant does not pay any upfront cost to participate: Consumers are able to search and browse deals via web or mobile and can subscribe to receive emails featuring deals they are interested in based on preferences they input. Groupon employs copywriters who draft descriptions for the deals featured by email and on the website. Groupon’s promotional text for the deals has been seen as a contributing factor to the popularity of the site, featuring a distinctive mix of thorough fact-checking and witty humor.

Some publications have noted potential problems with the business model. For example, the Wall Street Journal has reported that a successful deal could temporarily swamp a small business with too many customers, risking a possibility that customers will be dissatisfied, or that there won’t be enough product to meet the demand. In response to these issues, Groupon officials have stated that deals sold will be capped in advance to a number that the business can service effectively.

Merchants

In 2015, it was reported that 88% of merchants agree that their Groupon deal brought in new customers, and 82% of customers say they are likely to return to the merchant again. As of 2015, Groupon’s primary customer base was female consumers with a college education.

In 2010, it was reported that local merchants found it difficult to get Groupon interested in agreeing to a particular deal. According to the Wall Street Journal, seven of every eight possible deals suggested by merchants were dismissed by Groupon.

Groupon offers a mobile application available on iPhone, Android, Blackberry and Windows Phone. It allows users to browse and buy deals on their phones and redeem them using the screen as a coupon. Groupon is now also a part of several Daily Deal Aggregators, which helps them expand their target audience, gain traffic and increase sales and revenue.

In addition to daily local deals, Groupon’s channels have included: Groupon Goods, launched in September 2011, which focuses on discounted merchandise, although Groupon officially announced the closure of goods on February 19, 2020, but then decided almost three months later to phase down the Goods business and cut 44% of its employees; Groupon Getaways, which offers vacation packages and travel deals; and GrouponLive, where consumers can find discounts on ticketed events Groupon has also emerged as a check on price increases for certain essential commodities in many countries.

Geographic Markets

Groupon breaks into new markets by identifying successful local businesses, first by sending in advance a number of employees to research the local market; when it finds a business with outstanding reviews, salespeople approach it and explain the model, and use social marketing sites such as Facebook to further promote the idea.

Groupon has served markets in several countries including, the United States, Canada, Ukraine, Germany, Greece, France, the Netherlands, Belgium, the United Kingdom, India, Indonesia, Ireland, Israel, Denmark, Thailand, United Arab Emirates, New Zealand and others. In 2010, Forbes noted that there were over 700 Groupon copycat sites, the majority of them existing overseas.

On February 19, 2011 The Wall Street Journal reported that Groupon was preparing to launch in China. Groupon subsequently entered into the China market in a joint venture with Tencent and launched “Gaopeng”. After a year of struggling in the established market, Goapeng subsequently merged with Futuan. Groupon also launched in the MENA region with Groupon UAE on June 16, 2011.

Groupon entered the Indian market through the acquisition of local company SoSasta in Jan 2011. Finally, after winning a battle to acquire the groupon.co.in domain name, the Indian business was renamed Groupon in Nov 2012. In August 2015, Groupon gave up control of its India unit to Sequoia Capital and renamed the company Nearbuy. In February 2011, Groupon Russia announced it would join the Russian Company Mail.ru in order to start offering deals on its social network Odnoklassniki. This way, users would be able to buy and share deals from Groupon on their profiles.