June 7, 2011, 3:01 PM

Groupon gets into groceries

The daily deal leader launches a discount pilot program with grocer Big Y Foods.

Zak Stambor

Managing Editor

Lead Photo

Groupon Inc. today launched a pilot with Springfield, Mass.-based supermarket chain Big Y Foods to offer grocery-related discount vouchers. The first offer, sent to consumers in Springfield, is for a summer shellfish grill pack valued at $39.99 for $24. But rather than require consumers to present a printed-out voucher or a 2-D bar code on a mobile phone to redeem its offers, Groupon will allow consumers to redeem deals using their grocery store loyalty cards.

The daily-deal leader will send e-mails promoting the offers just as it does with other Groupons. But when a consumer buys the Groupon, the discount will be credited to her loyalty card.

Big Y has 57 stores in Massachusetts and Connecticut. Groupon could not be reached for immediate comment.

Allowing consumers to use their loyalty cards, rather than a voucher, will help ease grocery stores’ concerns about fraud, says Tom Schneider, president of digital marketing agency HaloEffect, which worked with Groupon and consumer behavior analytics company Incentive Targeting to develop the pilot.

“There is a lot of fraud in grocery coupons and with high-value coupons, which are worth as much as $40, people will try to game the system,” he says. “But if that coupon is loaded on to a loyalty card that can help minimize that whole problem.” Because the card is required to use the voucher, that means the grocer can more easily track which offers have been redeemed.

By working with Incentive Targeting, which tracks grocery store consumer-buying behaviors, Groupon will eventually target consumers with offers based on their previous purchases, says Schneider. “In the future with the data we have we’ll be able to say this person is a vegetarian and enjoys healthy foods,” he says. “And if we have a new yogurt that is organic that the person hasn’t tried yet, we can send them an offer for it. It’s a potentially mind-blowing thing.”

Groupon has the potential to transform the way grocery stores market because the daily-deal provider appeals to consumers who do not normally clip coupons as well as those that do, says Schneider. “It has the potential to revolutionize the grocery couponing space,” he says. “It opens grocery couponing space to a whole new customer.” Schneider says that if the pilot proves successful Groupon will expand the model to other supermarket chains.

The pilot represents another way Groupon is working to expand its core business. Last month the company launched Groupon Now in Chicago. The service enables consumers to find limited-time deals—that is, deals that last for hours, not months—to consumers based on where they are at the moment. Last week the company expanded Groupon Now to New York City and San Francisco.

Groupon, which last week announced plans to file its initial public offering, hopes to demonstrate that it can develop new revenue streams. The company noted in an S1 filing with the U.S. Securities and Exchange Commission that to sustain its value it has to continue finding ways to acquire new subscribers, persuade its current subscribers to buy more vouchers, expand its merchant relationships, bolster its brand awareness and respond to changes in how consumers access the Internet.

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