Groupon Launches Its Own Food Delivery Business, Groupon To Go

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Following its acquisition of food delivery service OrderUp earlier this month, Groupon is today announcing its own nationwide delivery and takeout service, Groupon To Go. The program is initially available in Chicago, where it has been in pilot testing with 500 restaurants since March, but the company says it will expand to other metro regions throughout the year, including Boston and Austin this fall.

While there are now a number of on-demand food delivery businesses on the market, a big differentiator for Groupon’s service is that it claims it will save its customers up to 10 percent on every order.

The “savings” aspect to the new service reflects Groupon’s overall brand image, which has historically been about finding consumers good deals.

According to Sean Smyth, VP and GM at Groupon To Go, Groupon’s interest in building out a delivery service came about due to interest from its own customers. Food and Drink is one of Groupon’s largest and most popular categories, he says, and the company currently works with thousands of restaurants who had been looking for ways to promote their own takeout and delivery options using Groupon.

Over time, as Groupon signed up more restaurants to promote their menus and delivery options on its deals platform, the company realized there was an opportunity to expand and offer more of an “end-to-end” user experience, Smyth says.

“It’s one thing to promote menus and get order, but how do you get that last mile? It’s that last mile that really inspired us to look at a company like OrderUp,” he says, explaining why the company acquired the Baltimore-based startup earlier in July .

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OrderUp, which still operates under its own brand name, offers food delivery in 40 cities across the U.S., mainly college towns. With the acquisition, Groupon is not only able to establish a food delivery foothold in dozens of cities in the U.S., it’s also working to integrate OrderUp’s technology into Groupon To Go. This includes things like the ability to track your order in progress as the driver heads your way, group ordering, order ahead functionality, and more.

However, at launch, Groupon To Go is largely working with those restaurants who have their own delivery and takeout services in place already. This includes national chains like Quiznos, Popeyes, Subway, and Papa Johns, as well as Chicago restaurants like Ditka’s Restaurant, Al’s Beef, Adobo Grill, BIG & little’s, Freshii, Rosati’s Pizza, Star of Siam and Wishbone.

However, Smyth says Groupon is months away from launching its own delivery infrastructure for those restaurants that haven’t yet provided delivery. Like many of today’s on-demand companies, this will involve the hiring of independent contractors who will become Groupon To Go’s delivery personnel. (The company isn’t yet commenting on headcount.)

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This expansion to non-delivery restaurants also represents what Groupon believes gives it the ability to compete in the growing market where a number of companies are offering on-demand food delivery at the push of a button.

While Smyth admits there is competition, he also says that many of the other services haven’t truly gone mainstream. As a point of comparison: while Groupon today says it has 25 million active uniques in North America, GrubHub recently said it has 5.9 million.

“Other services have done well to grow and promote themselves,” notes Smyth. “But it’s very focused on certain areas…If we can get to that consumer who really hasn’t used online delivery or online ordering to date, that’s how we can bring it to the mainstream.”

At launch, Groupon is subsidizing the Groupon To Go service by taking the consumer-facing 10 percent discount out of its own commissions on orders. But over time – and especially as it expands to offer its own delivery infrastructure – the company could extract higher margins from those restaurants that used Groupon’s delivery services.

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The food takeout delivery service also nicely ties into Groupon’s deals engine, as restaurants on the platform will be able to log in to their Merchant Center web-based dashboard to make menu changes, or turn on or off the promotions for their delivery business as demand requires.

Groupon isn’t yet saying when it expects to see a nationwide footprint for Groupon To Go, or if OrderUp will continue to operate independently as a separate brand. However, Groupon To Go should be live in several more markets by the end of the year, and the plan for the future is to expand quickly. That may include other acquisitions in the food delivery space, Smyth notes.

“We want to be aggressively bringing this to market,” he says. “Acquisition is certainly a way to get there.”

Chicago residents can use Groupon To Go here. In addition to online, Groupon To Go is also featured within the Groupon mobile app.