E-commerce daily discount
deal website Groupon has been dubbed the ‘fast-growing company
ever’ by Forbes, but its self-styled unconventional image
has caused problems over the past 12 months, as the Chicago firm
went from ‘cool’ start-up to global corporation. Louise Naughton
reports.
Go deeper with GlobalData
Most people remember the quirky kid
at school who stood out for a certain creative spark and resistance
to conformity. But what happens when that kid grows up? Do they
have to lose their individuality and blend in?
Groupon certainly hopes not. The
e-commerce daily discount deal website wants to stay the quirky,
off-beat kid we either once were or once knew.
The “fast-growing company ever”, as
it has been dubbed by Forbes, was founded in November 2008
in Chicago by entrepreneur Andrew Mason and was born out of online
collective social action website ThePoint, launched a year
earlier.
It was when it came to monetising
ThePoint that Mason found he could harness the power of the
online social community and so he set about offering daily deals
through Groupon.
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By GlobalDataThe website relies on a
group-buying idea whereby a preset number of buyers must be reached
for a deal to be activated.
While businesses may take a hit by
offering 50-70% discounts, they do receive an unprecedented amount
of exposure among hundreds of thousands of Groupon subscribers,
which then gives them the chance to turn a discount voucher user
into a loyal customer.
Rapid growth
Last year was a booming 12 months
for Groupon and a combination of activities propelled the company
from a ‘cool’ start-up to a global corporation within the space of
two weeks.
Groupon’s director of
communications Julie Mossler says its first nationwide deal with
fashion retailer Gap in August 2010 was a significant turning
point.
Within days of the Gap deal going
live, Groupon was featured on both the Today show and
Oprah and the rumours circulating that Google was
interested in acquiring the company further boosted interest,
propelling into becoming a household name.
The acquisition of German clone
CityDeal in May 2010, rumoured to be worth $100m, lent a helping
hand to Groupon’s expansion in Europe and the website is now live
in 46 markets around the world.
Mossler says it has in excess of
70m subscribers and is growing at a staggering one million
subscribers a week.
According
to a report by Morgan Stanley, Groupon was expected to pass $500m
in revenue by the end of 2010 and when the company was just 17
months old, Forbes reported it boasted a $1.35bn valuation
after its second round of funding (see box, right).
Coming of age
Yet, Groupon is no stranger to
controversy. Numerous litigation battles and a Super Bowl
advertisement that was extremely wide of the mark have threatened
to knock the company off its pedestal.
In March 2011, Eli Johnson from
Illinois, Chicago filed a class action lawsuit against Groupon in
which he claimed the website issues coupons with illegal expiration
dates. The Credit Card Accountability Responsibility and Disclosure
Act (CARD Act), signed into law in May 2009, prohibits the sale of
gift certificates with expiration dates of less than five
years.
“Groupon’s systematic placement of
expiration dates on its gift certificates is deceptive and harmful
to consumers,” said Johnson in his US District Court Filing.
“Consumers must act quickly to
purchase gift certificates – usually within a 24-hour period – and
as such consumers feel pressured and are rushed into buying them.
They then unwittingly become subject to the onerous sales
conditions imposed by [Groupon], including expiration terms that
are unconscionably short.”
Yet, via the FAQs on its website –
and confirmed by Mossler – Groupon says all is not lost once a
Groupon gift certificate reaches its expiration date. While it may
lose its promotional value, customers can still redeem the voucher
at the price they paid for the length of time stated by gift
certificate laws in their home state.
Patent tensions have also arisen
between Groupon and rival MobGob regarding an ‘897 patent,
Method of Community Purchasing through the Internet.
Groupon’s counter-patent lawsuit
against MobGob left the company on the losing side.
The US District Court in the
central district of California deemed all Groupon’s interpretations
of the patent in questions to be unnecessary and the lawsuit was
subsequently rejected.
Mossler says Groupon’s fall outs
and teething problems are all part and parcel of its position in
the market. “We do not foresee brand damage to the company as a
result of litigation battles as the reality is we are in an
entirely new industry and we are setting best practices for the
space around the world,” she says.
“We are trying to operate a
business under laws that are probably antiquated but it is very
important for us that we do act in accordance with local and
federal laws.
“Groupon is very exposed because we
are the biggest in the market and as such people are not only going
to be interested in seeing us succeed but also seeing us fail.”
The website’s disastrous
advertising campaign during 2011’s Super Bowl, which appeared to
poke fun at the plight of Tibet, shows Groupon is a long way off
from harmonising its quirky sense of humour with the responsibility
that becoming the “fastest growing company ever” has brought.
Whether it will want to shake off its unconventional image
remains to be seen.
