After seeing big and small competitors collapsing or withdrawing altogether from the race, Groupon still enjoys an undisputed leadership in the deal space. However, with slow growth in North America, and no growth at all in the international markets, the once fastest-growing company in history is having a hard time meeting the growth expectations of public markets.
With the stock almost at the same level as after firing Andrew Mason, Eric Lefkofsky left his spot as Groupon CEO to Rich Williams.
During the last earnings call, Rich said that Groupon scaled too fast and too far. He announced his plans to shed unprofitable international operations, focus on the local business and significantly grow marketing spend.
As Andrew wrote in his medium post, I, too, root for Groupon and hope Rich fixes the company’s issues. To remain relevant in the long term, however, I believe Groupon needs to undergo a major transformation to finally execute its vision.
Wait, What Was Groupon’s Vision?
Groupon’s vision has not yet come to fruition.
The vision was to build a platform that would help local merchants run their business not just through the daily deals but by offering a complete suite of solutions, including reservations, payments, loyalty programs, delivery and inventory management.
For example, Groupon could help a local coffee shop replace its obsolete loyalty program, based on punch cards, with a digital loyalty program hosted on Groupon apps that would reward customers for money spent with them. In another example, Groupon could offer sophisticated yield-management practices, such as table-surge pricing for high-demand days and time-based discounts for low-traffic days and hours.
Local merchants would connect and engage with the platform through Groupon’s own Mobile POS systems or by integrating Groupon into their existing POS systems.
Consumers would be able to engage with their favorite merchants not only for deals, but also for many other valuable services, making Groupon way more relevant and sticky in their daily life than the current value proposition.
Why Would Merchants Want Be Part Of It?
The majority of local merchants do not have the resources and time to build and run their own marketing programs or build their own apps. Local merchants that want to take advantage of the on-demand economy are already relying on other companies for services like delivery (DoorDash, GrubHub) or loyalty (Belly). Lots of those merchants could use a company with Groupon’s reach (more than 110 million mobile users) and resources to help.
Groupon needs to undergo a major transformation.
In 2012, when Groupon launched the option for merchants to create a rewards program for their customers within Groupon’s platform, a majority of existing merchants opted in. The rewards program was later killed due to lack of engineering resources, but it served as early validation of the Merchant OS value proposition.
Why Would Consumers Care?
Consumers would gain a completely new way to engage with their favorite local merchants. They could make restaurant reservations, check their loyalty program progress, walk away after a meal and complete Uber-like payments without waiting for the usual check/credit card ballet or schedule a delivery — all from the convenience of their Groupon app, which is probably already on their phone. There would be no need to download multiple new apps.
Why Would Groupon Be More Successful Than Others To Make This Vision A Reality?
The range of value-added services that is part of Groupon Merchant OS is similar to what Square is trying offer to their merchants to graduate from a pure payment system. However, opposed to Square, Groupon has the advantage of having a large user base to tap into in order to attract new customers.
Acquiring new customers is still the most important thing a local merchant wants from its marketing solution. Square’s attempts to create a customer base of its own through the Starbucks deal, and to turn their wallet into a liquid marketplace, have not been successful to date.
Groupon is one of the very few players, if not the only one, who still has a chance to create a local platform with broad adoption on both the merchant and consumer sides.
Groupon Needs To Go Private To Rebuild Its Vision
Winning the small merchant business is incredibly difficult.
Selling daily deals is a different job than selling solutions and critical mission capabilities like payments. In addition, POS upgrade cycles are still slow and range from 5-10 years. That is why this a long-term play.
New investors should take the company private and give it the chance to reemerge more relevant and stronger.
Executing on the Merchant OS vision requires a level of investment, focus and endurance to which the entire company has never truly committed. As a young public company that needed to please stock markets for past missteps, Groupon focused on quarterly earnings, as well as international and category expansion.
I hope the Merchant OS vision is what Rich is trying to refocus the company on. However, I’m afraid that to make the bold long-term bets required, inject new talent and succeed, the company needs to go private again.
Existing or, more likely, new investors should take the company private and give it the chance to reemerge more relevant and stronger by focusing on local platforms and truly committing this time to the Merchant OS vision.