Since launching in the UK in 2010 Groupon has achieved an astonishing rate of growth that is almost unrivalled in any other industry.
But, as was inevitable for a business that grew so big so fast, Groupon has also seen its fair share of negative headlines.
In December last year the OFT revealed that the company had breached UK advertising regulations 48 times, leading to an investigation into its business practices.
Then there’s the ‘accounting issues’ which have seen the companies share price drop from a high of $29 to less than $5 in less than year.
So what's next for Groupon? How can the company continue to evolve, while at the same time helping daily deals to become a more established and respected industry?
I spoke to Groupon’s UK MD Roy Blanga to find out.
The daily deals market has become extremely saturated. How can Groupon hope to differentiate itself from the competition?
When you think about this industry you always have to think about the two angles – there’s the merchant angle, which is the businesses that decide to use us to promote their products and services, and there’s the customer side, which is the consumers who decide to use us to buy new things.
The way we can differentiate ourselves is to continue to add value to both sides of the coin.
So for the merchants you make sure you constantly deliver the volumes they are expecting and provide the tools and the support to help them deliver the returns on those promotions.
And on the customer side we need to make sure that we constantly have good deals and maintain a high level of engagement.
Anyone can come up with one great deal, but the difficulty is to do it on a consistent basis and constantly deliver great value to your merchants and great experiences to your customers.
It must be a huge pressure on yourself and on your staff trying to come up with new deals every day in so many different cities. As the business grows will it become more difficult to find deals that cater to the number of customers you have?
Well it’s always a challenge to find new things to excite the customers, but we’ve been doing it now in the UK for a few years and I think we’ve been quite successful.
It’s just part of the job to find something new that will excite the customers and maintain that level of engagement.
So yes, it is difficult, but that’s part of what helps to differentiate us from the competition.
The daily deal industry, and Groupon in particular, has gotten a lot of bad press recently. Do you think that merchants and consumers still trust the industry?
I don’t think people have necessarily lost trust in the industry because the response from customers and the customer service feedback is quite positive.
The latest survey that we ran found that around 8 or 9 out of 10 customers who had previously bought a deal from us would recommend us to a friend.
It is true that there have been some instances where the deals have not worked as we expected them to or the customer experience wasn’t in line with what we wanted them to have.
But what we think we’ve been doing increasingly well is to minimise those issues and also be very proactive in fixing problems as quickly as possible and learn from those mistakes.
As a company we’ve had a strong evolution over the past 12 months and I think we are very well equipped to make sure that customers have a great experience.
Do you think there’s a fundamental problem with trusting your brand image to hundreds of smaller retailers around the country?
Well it’s about making sure you are working with the right merchants and the right partners.
And obviously it is in the merchant’s best interest to deliver a good experience as the deal is designed to benefit them in the long term, which won’t happen if the customers aren’t happy.
So as long as we do the right checks and the right due diligence then we can minimise those risks. We have a significant number of departments working to make sure that problems don’t arise.
Daily deals sites rely on a huge turnover of merchants and consumers. Do you think this raises questions over the viability of daily deals as a long-term business model? And do you think that some businesses in this space will inevitably go to the wall?
I think there will be some players that have to downsize or decide to exit the market, but I do think that this is a sustainable business.
If we look at it from the merchant’s perspective, around half of the merchants that feature every day are repeat customers.
This is a clear indication that the business model is working for them and delivering the returns that they need.
That number could be higher if we wanted it to be, but obviously we like to keep a good mix between new and repeat promotions.
At the Daily Deals Summit earlier this year you said that deals are risk-free for merchants. Do you stand by that comment?
I was comparing the daily deal industry to more traditional media, and what I was saying was that with Groupon there is no upfront cost and you only pay for customers that come through your door.
In contrast, with traditional media you have to pay a certain amount of money upfront without knowing whether the promotion is actually going to deliver any customers.
So if you use our service and put together a promotion that allows you to break even or even to make a margin on the units that you sell then obviously the risk is quite limited.
Now obviously there have been instances where the volume was too high and that’s where we need to work with the merchants to make sure that it doesn’t happen again.
There was an investigation into Groupon by the OFT earlier this year. How have you changed your business practices as a result?
We have significantly altered the way we work since then.
On the day of the announcement we published a blog post where we were very transparent with our merchants and customers about exactly what was being investigated and what we planned to change going forward.
In fact, before the results of the OFT investigation came out we had begun to make changes and that was recognised by the OFT as well.
So the result of the investigation really just accelerated some of the changes that we already had put in motion.
We have significantly changed and improved the business in the past few months and we are much more confident that the deals we offer to the customers are actually sound.
At the Daily Deals Summit there was a lot of focus on hyperlocal deals that can target consumers as they are walking down a particular street. Is that something you are working on?
We don’t offer that in the UK, but we have a mobile app in the US called Groupon Now which allows you to find deals in your proximity and that are immediately available.
So you can use it to look for food deals in your area for example. And that’s something that we are potentially looking at bringing to the UK.
You have a SmartDeals product in the US that allows you to tailor deals to the customer to make them more relevant. Is that something that would work in the UK and do you have plans to roll it out over here?
The technology allows us to tailor the newsletter to the customer so the deals are more relevant to them. It does this based on gender, past purchases and location.
It’s definitely something we are hoping to bring to the UK and delivering more relevant deals will help us to continue our growth, but we don’t have a date set.
How do you see Groupon developing over the next 12 months? Do you think there is still scope to keep growing, or do you feel you will eventually hit a ceiling?
I think there are still a lot of things we can do, such as the personalised emails for instance.
We can continue to grow by finding new ways of engaging the customers, whether it’s with new verticals, new types of deals or new ways of delivering the deals through mobile.
We can also strengthen our relationship with the merchants by providing them with new tools to maximise the benefits.
If we can continue to be creative then we can continue to grow.