|A few words from the new CEO:|
Why We’ll Win in Local
Posted in All Cities by Rich W
November 19, 2015 8:26 am
After two weeks in the CEO chair, a couple of things are abundantly clear…
1) Groupon is a misunderstood company. We’re misunderstood by analysts. We’re misunderstood by media. We’re misunderstood by consumers — both those who haven’t visited our site in awhile and those who’ve never purchased from us. We haven’t done enough to tell our story over the past few years. And we haven’t always been humble about our hits and misses.
2) We are still paying the price for our past mistakes. Not just in the media and with Wall Street, but in the business, every day. We scaled too far, too fast and have had a rough ride. That’s not missed on us; these issues have too often diverted our attention from the kinds of things that a company at our stage should be figuring out.
As a result, and not surprisingly, a few myths have built up over the years. So let’s dispel a few, and then talk about what we’re doing differently moving forward.
MYTH: Groupon is an email daily deal company — This is the biggie. And it’s typically followed up with something along the lines of ‘deals are dead.’
Too many people still think of Groupon as “that daily deal email company.” The reality here is twofold: first, we’re a marketplace — and a big one — one with more than half a million deals in three different categories. Sure, email is still important, but more of our purchases come from on-site search than email, and more than half our purchases occur on mobile. There’s simply nowhere better on the Internet to find awesome local merchants, great products and amazing travel offers and experiences all in one place.
Second, the ‘deals are dead’ line of thinking is tired and not supported. Deals are core to who we are as a company, and we’re not running away from them–not by a long shot. Deals have helped us build the largest transactional platform of its kind in dozens of countries around the globe and a loved brand. We also know that there’s more to our marketplace than deals, including an increasing number of market rate and low discount offers, and new ways to save time as well as money. They’re just in their early stages and we want to move faster to bring them to customers so that they can see clearly the changes for themselves. We’re going to do that, and fast.
MYTH: No one can win in Local — There are a number of big companies — Amazon, Facebook, Google — who’ve tried and died in local. Local is a hard business. As the unquestioned leader at this point, we know that better than anyone. On more than one occasion, we’ve been overly enthusiastic about the potential impact of new products, and we’ve been wrong more than once with how critical it is for us to compete in certain areas. We shouldn’t run from those failures or apologize for them. None of them bet the future of the company. We are pioneering, we are growing, and we are the market leader, which means we know that not every test will come out beaming rainbows and unicorns. Sometimes we will fail, and sometimes we will win, and win big. Winning big is absolutely possible in local. It’s a massive space that remains largely underserved. Consumers and merchants ultimately want that to change, and that makes winning in local possible. We have sold nearly a billion Groupons life to date. Add to that our nearly 50 million active consumer and 1 million merchant customers to date and you have a lot of proof of the possibilities in local.
MYTH: Groupon isn’t growing/Groupon is going out of business — On one hand, this is just lazy. On the other, that this is misunderstood is largely on us. We’ve definitely grown: since going public, we’ve grown billings and revenue by over 90%; we’ve had seven consecutive quarters of double-digit billings growth in North America; we’ve doubled our customers over the past five years; we’ve increased the number of deals on our platform by 500x since we went public in 2011; etc.; etc. What we haven’t done is consistently meet the expectations we set. We’re not growing the way we believe we can grow given the size of the opportunity in local and the potential in our platform. Both of those are going to change. More on that in a bit.
MYTH: Groupon is bad for businesses — We don’t hear this much anymore, but it still comes up on occasion. Our #1 complaint from merchants these days? They want to sell more Groupons.
The vast majority of our deals (82% as of the last report) are breakeven or better on the deal itself (i.e., no overspend or cross-sell required). That is simply unheard of in high volume small business advertising and customer acquisition. But let’s be clear: we still have to improve here. Not every brand or business is comfortable with deep discounts. We want to give more merchants more opportunities to run on our platform at lower discounts and with market rate offerings. You can see some of those opportunities today with Groupon To Go–more are coming.
So that’s that. Let’s talk about why I think we have what it takes to win.
First is our team. It’s amazing and one of our biggest assets. I can’t think of another team with more experience in local and that’s thrived with so many people betting against it. I’m honored and humbled to be a part of this team.
Then it’s our customers. We’re approaching 50 million customers worldwide and have worked with more than a million merchants to date. We have a loved brand with over 80% awareness in North America, and net promoter and customer satisfaction scores in line with the world’s best brands.
Next is a strong underlying model with a simple value prop that works for both consumers and merchants. Our business has weathered everything from email headwinds to a full marketplace transition–all while maintaining healthy fundamentals and selling nearly a billion Groupons (and counting). Why? Because consumers love to save money and merchants love to acquire new customers.
Last, we have unprecedented experience in local, and what we believe is the right vision and strategy to make our goal of becoming the daily habit in local a reality.
This is a powerful combination of advantages that’s very, very hard to replicate. So what are we going to do with them?
Given these advantages and the opportunity in local, we believe we can and should grow much faster. To enable that growth at a larger scale, we are focusing on three major strategic changes.
First, we are dramatically shifting our marketing strategy in order to drive millions more new customers to our marketplace. Core focus and investment in new customers isn’t a nice-to-have for a business at our stage, it’s a requirement.
Second, we are further simplifying and streamlining our business, in particular our international segments. This means moving to more shared services for economies of scale, and it means better picking our battles–exiting or partnering in countries where we don’t believe we can win or where winning will require more time, technology and investment than we should manage. And, in some markets where we’re seeing results — Australia, France, Germany, Italy and UK, to name a few — it means increasing our investment to better capitalize on the opportunity.
Third, we are moving away from empty calories in Shopping. We will no longer emphasize the higher revenue but lower margin consumer electronics business that we believe isn’t required in order to grow a sustainable, healthy Shopping business with stronger margins.
These are admittedly major shifts in our strategy for a new CEO who has been in the job for what amounts to a handful of days. I’ve been here for over 4 years however, and as I said before, I don’t need the proverbial 100 days to know that these are the right decisions. We simply can’t expect to win if we’re not willing to double down on what’s working and walk away from what’s not. And why wait to do the right thing?
With all these changes, there are some very important things that are staying 100% the same: our mission to connect local commerce; and our vision to build the daily habit for local commerce, the marketplace where people discover and save on amazing things to eat, see, do and buy in their neighborhood.
The same core market realities that brought me here over 4 years ago still exist today: local businesses have an incredibly hard time standing out and getting people to give them a shot; consumers want to save money and discover new things to eat, see, do and buy in their neighborhood. What’s changed in the last 4 years is that Groupon now better addresses these two market realities than anyone. And we’re still just getting started.
A lot of people have told me that I’m taking over the reins of this company in a very dark time. Plenty have said that I’m nuts to take this on. Without question, no one is handing us the keys to local with a big red bow tied around them. And while I’m shaking things up, I assure you that I’m not crazy. So I don’t look at this as a dark time. I look at this as a time to make things happen, faster. It’s the time to realize our potential and make Groupon better for merchants, for consumers, for employees and for shareholders.
On that note, I believe strongly that a better Groupon matters. It matters because local matters; neighborhoods matter. Part of what makes neighborhoods special are the businesses that line their streets and create hubs, energy and connections for communities. Groupon gives those businesses tools to grow and thrive. When local businesses thrive, neighborhoods win. I don’t know about you, but I think that matters, a lot.
I couldn’t be more excited about the opportunity to lead Groupon, and I’m looking forward to our next great chapter together.*
*This post contains forward looking statements. Groupon’s third quarter 2015 earnings materials, including a message on the use of forward looking statements, are available at www.groupon.com under the heading “Investor Relations.”