Fancy a 50 per cent discount on Laura Ashley homeware or a ticket for November’s Barbarians versus Australia match at Twickenham at a bargain £15?
These are just two of the offers available on Groupon, the online marketplace specialising in discount vouchers that people used to love to hate but which seems to be staging a comeback. Earlier this year it even came top in a poll of the best daily deal sites for consumers by moneysavingexpert.com, pushing Amazon Local into second.
Its rehabilitation has not gone unnoticed by investors — it is listed on America’s Nasdaq index of fast-growing companies. The company’s quarterly results reported at the beginning of the month revealed a stronger-than-expected revenue growth of 7 per cent to $608million (£373million). Despite making a net loss of about £4.7m over the period, shares jumped by 19 per cent.
What has changed?
The new Groupon, its executives claim, is about improved customer service and alliances with well-known brands that can handle a large volume of sales. Times Money reported in 2011 — “Customers lose patience with ‘misleading’ group sales websites” — that many customers had lost patience with Groupon after experiences they bought took months to book or failed to live up to expectations. At the time it was said to be the fastest-growing internet company, with five million users in the UK alone. Businesses who offered discounts and promotions through the site were unable to cope with the demand.
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Groupon claims to have learnt from its mistakes. “Value for money isn’t enough, which is why we are diversifying and increasing the number of deals we offer with the best businesses around,” says Susannah Belcher, of Groupon UK.
She points to a deal last month that was snapped up by about 130,000 people — a £5 e-voucher for Starbucks that allowed holders to enjoy £10 worth of products in the coffee shop. She adds that in April, the company teamed up with Brad Pitt’s charity, Make it Right, to offer users the opportunity to enter a sweepstake for the chance to fly to New Orleans and meet the actor.
Can consumers trust Groupon?
Martin Lewis, the founder of moneysavingexpert.com — where people have in the past complained bitterly about Groupon — says he was surprised by the results of the poll on his site. “I’m not against Groupon — it has some cracking deals and I do think it has upped its game — but I’m not sure it’s changed that much,” he says.
“I question whether the Starbucks deal, for instance, is really a Starbucks deal – I have a level of scepticism that it might be a loss-making deal financed by Groupon to position itself in the marketplace. The danger about daily discount sites is that on occasion they offer deals you can get elsewhere for free: we recently ran an offer where people could get 12-month Sky TV packages and unlimited broadband for half-price, saving up to £270 — an offer Groupon also offered for a fee of £9. It is good for people who know what they are doing and who check prices elsewhere. The risk is when people assume it’s a good deal just because it’s on Groupon. You have to sort the wheat from the chaff.”
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When asked by Times Money for clarity on who paid for the Starbucks offer, a spokesman for Groupon said they “couldn’t share the details of contracts agreed with their merchants”.
As for customer service — the company was criticised by the Office of Fair Trading in 2012 — Ms Belcher, pictured, promises things have changed. “We have worked hard to improve our customer service processes and have seen significant improvements in satisfaction scores as a result… a deal cap is [now] agreed [between Groupon and the company offering the deal] so there is no risk of a merchant feeling overwhelmed or unable to fulfil customer demand.”
Mr Lewis adds: “When I look at what I call my ‘whinge bag’ – the emails, texts and letters I receive from people complaining about the service they have received – Groupon is no longer the dominant presence it once was. I am also hearing fewer complaints from business owners who partnered with the site”.
Is it a good investment?
Some analysts are expressing cautious optimism. “Recently the customer response to Groupon’s efforts has been quite encouraging and it is generating promising sales growth,” says a spokesman for BrokerBank Securities, the investment bank. However, he adds that “the past questionable practices and spotty management still hang over the stock”.
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Zachs, the investment research company, points to ongoing concerns, adding: “Nonetheless, we believe Groupon is well positioned to gain from the rising e-commerce spending spree on mobile devices. We expect these opportunities to continue to drive top-line growth in the long run.”
Zachs rates the stock as neutral, suggesting that those who have already invested should hold on to their shares but that Groupon is not yet a buy for new investors.