Boy, do we have a deal for you!
It's a message that rang out loud and clear over the holidays
as retailers used aggressive promotions to boost sales and gain
bigger shares of a limited spending pie.
Thanks to the help of digital coupon providerRetailMeNot (
), many retailers could deliver holiday deals directly to
consumers via their desktops or mobile devices.
RetailMeNot is the world's biggest digital coupon
It aggregates digital coupons and promotes sales from
retailers across many product categories -- from clothing and
electronics to health and beauty.
In 2013, the company featured digital coupons from 70,000
retailers and brands and had 550 million total visits to its
RetailMetNot.com operates the biggest digital coupon site in
America, competing with privately held Dealspl.us,
BradsDeals.com, DealNews.com, Savings.com, TechBargains.com and
The company also operates the largest digital coupon
marketplaces in the U.K. and the largest portfolio of digital
coupon websites in France.
The digital coupon space is about to get more crowded in the
public market. Coupons.com is slated to float an IPO this week
under the ticker COUP.
In addition to scoring impressive wins with retailers and
consumers, RetailMeNot has been a hit with investors since its
initial public offering in July. The stock has more than doubled
since its IPO and touched a record high of 48.73 on Thursday.
Shares fell 11% to 41.77 on Friday.
The company also turned out a strong performance in the
holiday fourth quarter, its busiest period. Earnings rose 73%
from the prior year to 26 cents a share, topping views. Revenue
climbed 55% to $78.5 million, also besting forecasts. Meanwhile,
visits to its sites surged 24% to 184.1 million.
From Thanksgiving to Cyber Monday, RetailMeNot facilitated
2.6% of all e-commerce sales in America, CEO and founder Cotter
Cunningham said on the fourth-quarter conference call.
RetailMeNot benefited from the shortened holiday shopping
season -- with six fewer shopping days from Thanksgiving to
Christmas vs. the prior year -- in a couple of important
"From a financial perspective, we saw a heightened level of
promotional activity amongst retailers that drove very strong
operating results for RetailMeNot in our fourth quarter,"
Cunningham told IBD. In addition, "we saw significant increases
in consumer awareness and use of the RetailMeNot website and our
mobile apps due to the strong promotional environment as more
consumers used our services to discover savings opportunities on
the things they needed to purchase for the holidays.
Watchers expect the company to keep up its winning streak.
Analysts surveyed by Thomson Reuters expect it to post
earnings of $1.08 a share in 2014, its first full year as a
public company. They see a 25% EPS gain in 2015 and a 25% rise in
Cunningham started the company in 2009 with the purchase of
three small mom-and-pop coupon sites. A year later he bought his
biggest competitor -- RetailMeNot -- and adopted the name.
"What's fueled our growth is that we offer great value to
consumers and retailers who both keep coming back for more,"
Cunningham said. "It's a marketplace that's resonating with our
two customers: consumers and retailers."
Cunningham says one-third of its coupons featured on the site
are contributed by consumers. That lets the firm offer what he
calls more exclusive and exciting deals.
Consumers can open a link at the bottom of the RetailMeNot
website that says "submit a coupon." They can then upload either
the online promo code, used for shopping on e-commerce sites, or
they can upload a coupon that can be used in stores as well.
Wunderlich Securities analyst Blake Harper says RetailMeNot
features "more relevant content" on its site than rivals, which
is why its coupons come up at the top of Google search
With the large amount of content generated by its user base,
the content is hard to replicate.
RetailMetNot gets no upfront payment from retailers. It gets a
small commission on the sales it helps facilitate, so retailers
pay the company only for sales it drives.
"Only 2% to 3% of visits to retailers' websites are converted
to sales," said Cunningham. "We represent the nudge that makes
consumers make the purchase."
The company benefits from the "secular shift" from consumers
clipping coupons out of newspapers and other printed materials to
digital coupons, Harper said.
Another big opportunity for RetailMeNot -- and an area of
interest to investors -- is its mobile application prospects.
Consumers use its app to discover, store and access the
digital coupons they want and to redeem the coupons online and in
stores. They can browse digital coupons, stores and product
Apps also let users share digital coupons with others via
email, text message or social media channels.
In addition, RetailMeNot has more than 5,000 shopping
locations, including malls and shopping centers, that use
geo-fence, which is a GPS-enabled virtual fence around these
Using this location-based technology, the RetailMeNot app
notifies consumers of saving opportunities when they are shopping
near these shopping malls and centers by sending them alerts for
digital coupons that can be used in the malls.
Consumers can redeem these digital coupons by scanning the
barcode at the retailer's register or by having the sales
associate enter the promotional code shown on the consumer's
mobile screen into the retailer's point-of-sale system.
Harper sees a lot of potential with the mobile in-store
opportunity for RetailMeNot. "That allows them to address a
market that's about 10 times the size of their current e-commerce
Not Very Mobile, Yet
Mobile is only a small part of the company's revenue,
RetailMeNot spokesman Brian Hoyt says. "But we believe there's a
large market opportunity to grow transactional activity,
especially in-store, through the mobile channel."
In the fourth quarter, 88 retailers used RetailMeNot's mobile
solutions for offers to in-store shoppers, up from 65 in the
Continuing to expand mobile and improve the app experience is
a part of Cunningham's strategy. He's also focused on expanding
the company's international presence, which represents 22% of
RetailMeNot hasn't talked about specific expansion or buyout
plans, though spokesman Hoyt said: "We continue to be very
interested in opportunities here in the U.S., Europe and in