Groupon Reveals Its Future Lies In Self-Serve

Update: this post was picked up by Mashable, Business Insider, Screenwerk and was the top story on Techmeme on October 24, 2010.

Update: full details of the program are available here.

Groupon is quietly testing a self-serve deal platform for merchants to manage real time offers for consumers named Groupon Stores. According to Groupon, this is the future of the company:

“Groupon Stores is a place where your favorite, local businesses can sign up, create a store page, and post deals at anytime for you to see. Welcome to the future of Groupon.”

Based on  a google site search, it appears that less than 10 merchants are currently participating.  The best-performing offer has sold over 100 deals while some have sold less than 10.

Groupon’s vision to become a broader local marketing platform has several strategic benefits, including:

• Serving their backlog of interested businesses. A challenge for the company hasn’t been finding businesses to work with, its been servicing all the businesses that want to. For every business that Groupon works with, the company has to turn away 7, and there’s a six month waiting list in many markets.
• Improved personalization for consumers. The quality of Groupon’s personalization feature is a function of the available offers in each market, and if self-serve can dramitically increase the number of available offers then personalization should improve.
• New user acquisition channel. Should businesses encourage customers to “follow us on Groupon,” those customers would presumably become Groupon users as well.
• Erecting Barriers to Entry. It’s easy for merchants to run Daily Deal offers on different services (on Yipit, which aggregates all the deals, it’s not unlikely to see two or three different offers from the same business in the same day). On the other hand, merchants who invest heavily into building a presence on Groupon Stores, and drive their customers to engage with them there, are unlikely to start the process over when competitors roll out similar offerings.

Groupon Encroaching on Facebook’s and Twitter’s Territory

As part of Groupon Stores, Groupon is including a “follow” button for users to specify that they would like to know about offers from this business. Receiving offers is already one of the leading reasons for consumers to follow businesses on Facebook and Twitter, and this feature seems streamlined for that aspect of communication.

Groupon is typically thought of as a new customer acquisition channel, where businesses pay heavily in discounts and commission to get a new customer to walk through their door. With this new feature, Groupon hopes to engage in the other half of local marketing – convincing current customers to come back and spend more.

Challenges to Groupon Stores

Groupon Stores also presents new risks for Groupon:

• Competitive Risk. If Stores merchants are business that want to be featured on Groupon’s email, but are not, then they are ripe for poaching. They’ve structured their offer, and are likely a fairly simple sell for a competitive site promising distribution. The competitive costs are an expensive tradeoff for a lower margin product. Currently a google site search reveals the merchants currently participating.
• Discount-focused CRM is not ideal for most local businesses. While consumers might prefer a relationship channel solely focused on deals, local businesses probably do not. Non-deal CRM platforms, such as Facebook and Twitter provide broader context for: branding, engagement, introduction of new products, customer service. Many local businesses might utilize deals to get new customers through the door, but it’s unclear their next step is to encourage them to drive them to their Groupon page.
• Groupon’s success here may work against itself. Should Groupon users start following their favorite businesses, a friction will emerge where users expect to be alerted of offers from their merchants, but merchants would want to surface its deepest discounts to everyone but their current customers.
• Quality control. The offers that Groupon emails out have been heavily negotiated by their sales people and vetted by various QA individuals in the Groupon organization. It will be challenging for Groupon to do the same with a self-serve product.

With Groupon Stores, the company is painting a very grand vision for its future: owning the entire stack between consumers and local merchants.  We will continue to monitor this exciting development.

Thanks to midVentures, a Chicago-based consultancy, for pointing this out on their blog. Heard anything else interesting? Comment below or call us out on Twitter:@yipit. Otherwise, we’ll get back to building Yipit, which gathers and filters daily deals based on your tastes.