Groupon’s shift from local could be long haul risk


Groupon has shifted its strategy to invite high street brands to become its latest partners, providing well-known companies with an “alternative form of marketing to TV or press”.

While I would be foolish to suggest a company worth an estimated $25bn (£15.61bn) is biting off more than it can chew, the choice to partner with big brands does suggest a move away from what made the site so popular in the first place – the local element.

Groupon currently claims its daily deals will make you “see your city in a brand new light”. It provides an experience that sets it apart from many other discount code websites: location-based offers that bring users experiences they never knew were just a walk away from home (although many clones have now followed).

While getting a discount massage in Mayfair is sublime, finding a deal in your inbox for a pampering session at the end of your road is even better. You get the same flutter of interest as when your small, insignificant town appears on the BBC weather map (Or perhaps that only happens to us from Worthing…).

The fact that the deals landing in users’ inboxes are localised means they are far less likely to treat incoming e-mails as spam – perfect for the little guy struggling to advertise their small to medium-sized business in a crowded market.

Groupon’s UK head Rajen Ruparell says that a year ago Groupon did not suit bigger brands but apparently its scale now means it does. A year seems a very short space of time to make such a leap of logic and change strategy so dramatically.

Although Groupon has always offered national deals alongside its city discounts, the move to bring in well-known brands could put the site in danger of being akin to the voucher code booklet that often arrives through letter boxes only to be dumped straight in the recycling.

Anecdotally, the other element my friends loved about using Groupon was that it offered local experiences they would never usually consider paying for at full-price, or services they never knew existed locally – not just money off the physical goods big brands would offer.

Groupon has done fantastically since its inception in 2008. In just three years it has changed the face of internet discounting, spawned hundreds of copycat sites and is soon to be more than the estimated value of the entire UK online retail market, according to Deloitte.

Many people would say the next natural step of progression would be to partner with big brands to build on this success and guarantee longevity. Some would say it is not possible for Groupon to stay valuable when only dealing with small businesses.

But changing the original business plan could be risky. By working with small to medium businesses, Groupon tends to maintain control over the deal and how it is distributed – but big brands are more likely to want to take ownership which could lead to complications.

And if every brand is keen to get a piece of the Groupon action, it will be difficult for some to make noise in such a crowded space – the little guy’s presence would become a tiny speck on the once vast window of opportunity. These partners could soon move elsewhere, taking with them all the irreplaceable experiences and services.

What would Groupon then offer the consumer beyond competitor services such as Facebook Deals and Foursquare?

Groupon’s choice to work with big brands is no doubt lucrative in terms of monetary value, but moving away from local, niche offers into the mainstream could start to cannabalise the unique personalised offer that originally fuelled its rapid growth.

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