November 10, 2010, 3:13 PM

Groupon cozies up to merchants with free mobile app

The bar code scanning app helps smartphone-touting staff redeem and track “Groupons” coupons.

Lead Photo

The app enables merchants to scan bar codes on Groupons

Facing steep competition from sites like LivingSocial, BuyWithMe and flash sale merchants like Gilt Groupe that are entering the local deal market, daily deals behemoth Groupon.com is attempting to simplify the process for merchants to redeem its local deal coupons called Groupons.

It’s doing it with a free bar code scanning app for mobile devices using Google Inc.’s Android operating platform that enables merchants’ staff to use a smartphone’s built-in camera to scan and redeem Groupons presented by customers. Groupon says it plans to launch a similar app for Apple Inc.’s iPhone and iPod Touch and will soon ship as part of a special merchant promotion Android phones and iPod Touches preloaded with the Groupon app to thousands of affiliated businesses.

When an employee uses the app to scan a Groupon coupon, purchase data is immediately transmitted to the merchant’s interface on Groupon.com, allowing business owners to track redemption and the total amount spent by a customer, Groupon says.

Groupon says the app will be especially helpful for businesses with several locations or that have sold thousands of Groupons.

In addition to the new mobile tool, Groupon also says it will soon launch a merchant analytics dashboard and communications tools to help businesses stay in touch with new customers they gain through Groupon. Groupon already offers some merchant tools including webinars, employee preparation videos, capacity planning and ROI calculators.

Groupon may be giving its merchants a little extra TLC because it’s feeling heat from new competitors looking to tap its successful business model. Groupon, one of the first in the space, takes a hefty 50% cut of each coupon sold, according to its web site. It takes a lower 30% for deals promoted through Groupon stores—virtual storefronts where merchants can run their own deals. Stores are different from traditional Groupon offers because consumers must choose to follow a store. With the traditional Groupon program, shoppers sign up for the Groupon service and learn about daily deals from many merchants via e-mail, Facebook or Twitter. Groupon also recently announced a program to offer more personalized deals based on buying behaviors, so that, for example, a male isn’t offered deals for women’s shoe stores or manicures. That, Groupon says, will increase the amount of deals purchased by shoppers and will enable Groupon to offer deals from more merchants.

Competitors like LivingSocial and BuyWithMe are trying to cut into Groupon’s corner on the market. LivingSocial, which operates a web site where consumers can find daily coupons for restaurants, hotels, spas, bars and sporting events, raised $25 million in a Series B round of venture funding in March and another $14 million in May. It’s used that money to launch an affiliate program and enter more markets. Late last month it announced it began offering deals in Ireland, while also adding new markets in the United States, Canada and United Kingdom. It now offers deals in more than 100 markets. It also bought social adventure local deal company Urban Escapes in October and recently began offering neighborhood-specific deals to bargain seekers in Washington, D.C., and New York City.

A similar company, called BuyWithMe, raised $16 million this July in a Series B round of venture funding.

Groupon and LivingSocial both offer iPhone apps consumers can download to get deals delivered to a mobile device. Groupon offers an Andriod app as well.

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