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Groupon Is Dealing in Déjà Vu

Loyal users of Groupon (GRPN) may soon find that the site’s deals of the day increasingly resemble the deals of yesterday or last week.

Juan Camilo Bernal / Shutterstock.com

Groupon used to offer mostly one-time-only coupons to stores and restaurants. But now 41% of its merchants have already held other, similar deals in the past, according to daily deal analytics firm Yipit. With the stock price down 36% in the past quarter, and as the company continues to struggle to boost its revenue, analysts say Groupon may start dealing in even more déjà vu.

The company reported revenue of more than $568 million in the second quarter, an increase of 45% over the year before but short of Wall Street estimates of nearly $575 million. Investors have raised questions about the future prospects for the company, the validity of its accounting practices and whether daily deals will continue to attract consumers.

By developing longer-term relationships with merchants and working with them to offer deals over and over again, some experts say Groupon can derive more revenue from the same merchants rather than starting from scratch to recruit new clients for each deal. The merchants, in turn, will benefit from analyzing past deals to see what worked and what did not, says Jack Vonder Heide, the president of research firm Technology Briefing Centers. “It’s a long-term formula for success,” he says.

So far the model seems to be working: Repeat merchants performed 21% better than new merchants between the third quarter of 2011 and the first quarter of this year, according to Yipit. But figuring out which merchants should run multiple sales and how frequently the sequel deals should follow the originals will require advanced analysis of Groupon’s data, something the company is still struggling to utilize, analysts say. A Groupon spokesman said the company’s growing use of repeat merchants shows that the coupons works for businesses looking to gain customers, and are a “good thing” in spite of criticism that vendors have been hurt by offering Groupons.

As for the repeat-merchant strategy, Tom Jacobson, senior executive of pricing and profitability at consulting firm Accenture, says that while customers often gravitate to familiar brands, there may be a point at which they get sick of shopping there — something that only a more detailed breakdown of the data would show. “It’s the scalpel versus the ax — how many deals with that vendor will breed more deals?”


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