Today 500,000 merchants work with Groupon. While that sounds like a big number, Groupon sees much greater opportunity in the space with 30 million local businesses out there. And while Groupon is best known for its daily deals, it is interested in becoming much more than that. As we’ve heard so many times at the BIA Kelsey Conference, Groupon is seeking to leverage its existing business into leads for other marketing services. Sean Smyth, SVP of partnerships at Groupon, acknowledged that in order to reach their goal of becoming a platform as opposed to an event based service, it must work with other companies in the local space.
What spurred this service expansion? It was Groupon’s experience with daily deals as a demand vehicle. Merchants would use Groupon to drive demand for their services, but Groupon was in many cases too successful creating fulfillment issues for the business. In order to help avoid problems like this, Groupon had to learn the business of those they were helping, and in some aspects, it had to know the business better than its owner since the merchants had often demonstrated an inability to forecast the impact of its offers. In learning the business, Groupon discovered there were so many other inefficiencies that existed within small business, many of which were areas where Groupon felt they could help.
Another driver for change was the realization that the daily deal product provided limited engagement with the merchant. While 50% of merchants that run a deal on Groupon followed up with a second deal, that still only constituted a single digit number of engagements. Groupon wanted to work not on driving single events, but on something that could be a constant service, a platform.
So, Groupon acquired Breadcrumb to expand its services. Breadcrumb is a restaurant tool and an investment in the future to improve Groupon’s value chain. Breadcrumb is on its way to being the operating system for local businesses to provide services like POS, payment services, and a reservation platform.
But as they build the supply side of their business (now a marketplace of 65,000 deals per day just in N. America), Groupon is again looking at the demand side, and that is where partners can help. They have a partner program – a global platform where partners can incorporate or add Groupon offers and deals into their own marketing tools or services to reach consumers. It will be interesting to see if Groupon can successfully expand the service that made it so popular.