Groupon Thrives In E-Commerce, But Is Still Misunderstood

Many small retail businesses and individuals selling products use or eBay for their e-commerce needs. Albeit, Groupon , is most likely not the preferred choice, as the mantra of daily deals still resonates through the minds of many consumers and businesses. However, as Groupon CEO Eric Lefkofsky insists that his business is "misunderstood " and it shifts toward an e-commerce based approach, the value in its platform is most certainly on the uptrend.



E-commerce has become a phenomenon, a true growth engine of retail, and in the U.S., we most often see three different types of platforms. The first type, and most prevalent, is that like, where users search for the product they want to purchase or compete with other vendors to sell at the best price.


Most retailers like Walmart have adopted a similar approach as with online stores, albeit with no private vendors.

Then, there's an up-and-coming specialty flash-selling e-commerce type. Zulily is a great example, a company that specializes in women and children's clothing, then buys and sells all of their products in bulk via flash-selling, or for a specific span of time at a lower price.

The third type is Groupon, one that is very much in a league of its own, selling goods, travel, service packages, food, and just about anything that can be sold all at a discounted deal price. Groupon has leveraged its 53.2 million users and their buying tendencies with technology so that it can offer returning customers deals that they are most likely to buy. In essence, Groupon's approach is very similar to its daily deals business that faded, but by offering 1,000s of deals and prioritizing those deals based on the purchasing practices of consumers and their location, Groupon has a better opportunity to make a sale of a specific product, such as a spa or travel package.

Still, Groupon's worst enemy remains itself, as it constantly battles the unfavorable reputation that comes with daily deals -- a business declining at nearly 10% annually -- with the success of its e-commerce approach that grew 67% in its last quarter . Furthermore, Groupon claims that nearly 92 million people have downloaded its mobile application, which is far more than the 53.2 million customers who are active.

Credit: Groupon

This means there are still a lot of ex-Groupon users who remain absent, not taking advantage of its new e-commerce platform. Most likely these are customers that Groupon has lost during its transition from daily deals to e-commerce, but might come back as Groupon proceeds with its transformation.

With Zulily, goods are bought directly from the manufacturers, and with Amazon, sellers are often lost in the midst of 1,000s of smaller and large vendors who also sell on the site. Yet, Groupon has created a platform where the vendor who is most willing to give the best deal has a great chance at success.

In the Cincinnati area, local business Massageville is one that stands out among Groupon's many deals. Why you might ask, the owner offers a 50% discount, a good deal for Groupon users and one that looks good for Groupon to highlight because of the large savings. The owners, Carolyn and Beth, insist that Groupon has allowed their business to stand-out and be successful against competing corporate giants, such as Massage Envy, leading to over 100 Groupons for the small business, customers it might not have served if not for Groupon.

Then, Groupon also works with large vendors -- like retailer RadioShack -- who is currently offering $30 worth of products for only $20, selling the exclusive for a three-day period, forcing Groupon users to stay on top of the site's newest listings.

The point is that Groupon has quietly transformed itself into a viable e-commerce platform, and sees itself growing through this business for many years to come. Back in February its CEO talked in detail about the fact that so many millions of consumers and local commerce companies have payment information on file, and that Groupon will one day offer automatic bill pay with a discount in-store without ever needing a wallet or smartphone for its vendors and buyers .

Hence, Groupon has changed considerably as of late, and is moving in the right direction with consumers and commerce vendors likely to return. In retrospect, this suggests that Groupon will be understood once more, and perhaps thrive with a unique e-commerce approach.

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The article Groupon Thrives In E-Commerce, But Is Still Misunderstood originally appeared on

Brian Nichols owns shares of Apple and ZULILY, INC. The Motley Fool recommends, Apple, and eBay. The Motley Fool owns shares of, Apple, and eBay. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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