Groupon (GRPN) Ambitious Growth Plans, Lack of Compensation Has Sales Staff Looking Elsewhere

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Shares of Groupon, Inc. (Nasdaq: GRPN) are trading higher on the session heading into the company's third quarterly report as a publicly-traded entity, but should investors heed a little caution moving forward?

According to reports out earlier, the very backbone of Groupon might be experiencing a massive shakeup as pressure to grow continues mounting.

The WSJ said that many of Groupon's sales employees are looking to exit the company, sending out resumes to start-ups and tech firms all over the West Coast, and much of the U.S. in general. The moves come following a change last year, when Groupon shifted from a more relaxed, employee-friendly sales environment to one where employees might see little to no incentive under a new sliding-scale plan. The plan doesn't pay much in commissions unless certain aggregate monthly profit targets are met, and Groupon hasn't been crystal clear with employees on how that scale is measured.

CEO Andrew Mason has lauded how important a strong sales personnel is for Groupon in recent interviews and conference calls, even going as far as to hold a special dinner event for veteran sales people at the company (though some say Mason appeared to have forgotten about the scheduled event, ordering last-minute pizza. Admittedly, his company was about to go public, giving him plenty on his plate to worry about).

One employee noted that the increase in competition -- from peers like Google (Nasdaq: GOOG), Amazon.com (Nasdaq: AMZN), and others -- in the daily-deal space has led t fewer and fewer opportunities. The employee did say that profit margins have remained that same amid the squeeze.

Still, the Street is looking for sales to increase 3.1 percent from last quarter, and nearly 14 percent from its fourth-quarter numbers reported in February. Recent news for Amazon's LivingSocial daily-deals site might be encouraging for investors as well, with the unit swinging into profit in its most recent quarter.

While the problem's probably won't affect Groupon in the near-term, prudent investors would do well to listen in on Groupon's quarterly call for any hints about its sales force and how performance has been. Investors would also take note of news last week that newly hired Kal Raman, who joined from Amazon in May, was promoted to SVP, Global Sales and Operations. This might mean Groupon's sales structure could get another facelift...maybe in the right direction this time.

Of Groupon's 12,000 employes, about 45 percent are said to form the sales unit.

Groupon is up about 2.0 percent Monday, well off of intraday highs.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Earnings , Stocks

Referenced Stocks: AMZN , GOOG , GRPN

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