Groupon’s purchase of LivingSocial for a negligible sum may seem to provide further proof that daily deal sites are on the way out. But if anything, the acquisition shows that vast change is required for these brands to survive beyond 2016.
Both companies have already made shifts to adapt: restyling themselves as marketplaces, streamlining operations, shedding jobs and, in the case of Groupon, exiting unprofitable geographies to concentrate on customer acquisition in North America (and buying up a rival company).
The acquisition is primarily a customer base expansion, according to Groupon CEO Rich Williams. The deal will add one million of LivingSocial’s active customers to Groupon’s existing U.S. customer base of 29.1 million users.
The RTP team debates what Groupon should do to regain its footing within retail, and whether the changes to similar daily deal sites are enough to make them viable, even if they are now smaller than they were at their peak.
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Debbie Hauss, Editor-in-Chief: I have felt like Groupon is moving in the right direction with its TV ads focused on the “Have Dones” instead of the “Haves” — signaling that the company gets the consumer trend toward experiences vs. stuff. The acquisition and subsequent rebranding (to come) of LivingSocial aligns with that approach. Additionally, the movement toward calling itself a Marketplace vs. a Daily Deal site is another indication that Groupon is attempting to salvage whatever it has left as a recognizable brand. I also imagine that at this point in time Groupon is regretting the decision to turn down a $6 billion acquisition offer from Google back in 2012. Going public was not the ticket to success, among other initiatives designed to bring Groupon back to life. It will be interesting to watch the company’s next moves, but a gambler might not be thinking it’s a good bet.
Adam Blair, Executive Editor: The news that Groupon would swallow up one-time rival LivingSocial for what’s apparently a not very large sum might seem to signal that the once-hot daily deal segment is on or near its deathbed. But I don’t think it’s time to write that obituary just yet. Groupon’s woes seem to me at least partly attributable to too-rapid international expansion, more than likely fueled by what now seem like ridiculously high Wall Street valuations in the early part of this decade. In hindsight, it would have made more sense for Groupon and similar sites to focus not just on acquiring new customers but on retaining and maximizing the value of the customers they had. (Any retailer will tell you that such repeat business is the key to success.) The key to accomplishing this now will be a relentless focus on targeting and personalization, so that site visitors will continue to discover products, services and experiences they didn’t even know they wanted — but now can’t live without. This won’t be easy, but with a powerful algorithm and a narrower, more focused operational footprint, Groupon might be able to stage a comeback as a smaller but stronger brand.
Alicia (Fiorletta) Esposito, Content Strategist: My RTP colleagues have already touched on a lot of great points – those that I agree with and don’t necessarily need to repeat. However, I have to say I find it so extremely interesting that Groupon is shifting its brand and marketing focus to experiences and that it’s acquiring a daily-deal cohort that focuses extensively on travel, excursions and experiences. Minimalism: A Documentary About The Important Things and the tiny homes movement are reaffirming one important fact: that many consumers are actually trying to downsize, remove the clutter from their lives, and spend their time and money on travel and experiences…not stuff. I’m not saying that Groupon’s shift coming on the heels of these developments is all strategy, but it definitely is a way for the daily deal marketplace to differentiate moving forward. I’m excited to see what plans are in the pipeline. Will Groupon be divesting in products? How will this impact cross-device shopping? Will the company’s messaging continue to evolve? I guess all we can do is wait to find out!
David DeZuzio, Managing Editor: While it’s true daily deal sites are not as popular as they once were, Groupon’s acquisition of LivingSocial (and its valuable customer base) is a smart move. And while Groupon may never be worth the astronomical figure it once was, it can still position itself as the go-to place for daily local deals. With its recent high-profile television advertising campaign, Groupon urges people to go out and “Own the Experience” and pits the “Haves” versus the “Have-Dones.” This is brilliant marketing that begs everyone to enrich their lives with memories rather than “stuff”. The quickest way for Groupon to improve its footing is to make the redemption of these experiential offers easier and as frictionless as possible. The good news? They’re working on it. As a side note, any retailer that turns down a nearly $6 billion acquisition offer may need a little coaching in the art of the deal, but let’s be fair; few things in this world are worth that much money and if the potential to make $60 billion was out there, who can blame them for turning it down? Hey, it’s all in the eye of the beholder, or, in the case of retail, it’s all in the wallet of the customer. Either way, Groupon is making all the right moves.
Klaudia Tirico, Features Editor: Daily deal sites may not be getting as much traction as they once did, but that doesn’t deem them unsuccessful in my book. Groupon’s acquisition of LivingSocial is something I honestly did not see coming, but when it happened, it made total sense. In a previous discussion the RTP team had regarding flash sale sites, I mentioned that sites such as Groupon and LivingSocial aren’t appealing to consumers in terms of email marketing and overall branding, but Groupon’s latest efforts are beginning to prove me wrong. For example, the company’s latest TV ad urging people to go out and “own the experience” reminds consumers of what it is and has always been about: the idea of trying a new experience. Moving forward, Groupon should continue to position itself as a place to discover new products and experiences, and use personalization to win back the hearts of its consumers. Now with LivingSocial under its wing, I think Groupon can reach even more consumers and break out of its rut.
Glenn Taylor, Senior Editor: The daily deal concept may not be on its last legs, but the retailers that relied on the model as the main source of income have either had to fold or pivot toward another business model. Groupon purchasing what was once a major competitor for such a small sum shows just how miniscule the value of these companies is now relative to the past. We can’t forget that economic factors played a gigantic role in the downfall of many of these brands. As the economy bounced back from its 2009-2010 levels, the novelty of the cheaper deals simply didn’t resonate as strongly with the consumer. While there is certainly plenty of room for discounted products, shoppers are so price conscious they will often seek out cheaper products they already know they want, rather than a random selection. I do like the idea of Groupon expanding its reach via the LivingSocial clientele though; I don’t think there’s much of a risk in bringing the brand aboard as a means to increase market share. If the brand is already slimming down its operations from 27 to 15 countries, it shows that the company is regrouping to focus on where its business matters: the U.S. and Europe.
