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Consumers may find more deals with large retailers that have nationwide reach.
Don't expect online daily deal site Groupon to veer too far away from its model of offering hyperlocal deals that focus on smaller merchants. But just more than a month after the company's first national deal in which it offered $50 worth of Gap merchandise for $25, the company is looking into the possibility of more deals with large retailers that have nationwide reach.
Rob Solomon, Groupon's president and chief operating officer, said today at the Shop.org conference outside Dallas that 90% of the deals offered by the company will remain hyperlocal—that is, appealing to consumers in specific cities through discounts to a variety of local, smaller merchants. But consumers can expect more national deals, too.
"National brands are part of the local fabric," he said during a keynote session. "We'll sprinkle them in when it makes sense. We won't change the model dramatically."
Groupon’s Aug. 20 Gap offer boosted Groupon site traffic 37% over the previous day, according to web traffic measurement firm Experian Hitwise. Groupon said 441,000 consumers bought $50 Gap vouchers for $25, for total sales of over $11 million. Solomon today deemed the promotion a success for both Groupon and the Gap, saying the retailer would have had to spend tens of millions of dollars on prime time TV ads to acquire the same number of consumers.
Solomon said most businesses that offer discounts through Groupon use the service primarily as a way to acquire new customers, not just to gain incremental sales. Whether a business makes money on the discounts depends on the category, he said without elaborating.
"We tend to see a lot of businesses at least breaking even," he added. Groupon takes on average half of the voucher sales, a spokeswoman says. She would not disclose terms of the deal with Gap.
97% of merchants renew with Groupon, Solomon said, with a one- to six-month backlog of merchants waiting to offer Groupon discounts, depending on the city. Though discounts often apply to bricks-and mortar merchants, he said, Groupon has experienced recent success with online-only discounts. A discount offer from photo printing and e-retailer Shutterfly Inc. over the Labor Day weekend, for instance, attracted 100,000 buyers, he said. Shutterfly is No. 67 in the Internet Retailer Top 500 Guide.
Solomon shared the stage with Mike Murphy, vice president of global sales for Facebook. While Murphy was less specific about Facebook's plans to make money from online retailing, both he and Solomon agreed that social commerce remains in its infancy.
"We believe our role and model is to be a template that can be available for companies and brands to make connections with people," Murphy said. He pointed to Levi Strauss & Co. as an example of a retailer that has made effective use of Facebook for retailing.
Levi.com has Facebook woven throughout its site, and the retailer encourages consumers to declare what they like.
"Levi's is leaning so far forward with work they are doing," Murphy said. "They are looking for information about how to launch their next products."