Groupon is trying out a new marketplace which moves it even closer to the likes of eBay and Amazon. Groupon Stores, now in beta, enables merchants to establish a storefront at groupon.com/stores.
Products sold on Groupon Goods need to discounted 5% at a minimum and Groupon intends to charge 15% commission fees. Merchants will be responsible for order fulfillment which is very different from how orders are processed now via Groupon Goods, where fulfillment is processed by Groupon directly.
Over the years Groupon, LivingSocial and others in the daily deal space have found out that the sale of physical goods, which can be marketed and sold nationally is much more profitable than coupons and vouchers based on local offers.
The math is simple. Marketing a physical product to hundreds of millions of subscribers nation-wide generates a much larger response vs a local offer that’s sent out to ten’s of thousands of deal subscribers.
63% of Groupon’s revenue in the 4th quarter came from the sale of physical goods, while growing 56% overall in 2014.
This is a natural move for Groupon and I like the concept of controlling product pricing to ensure the cheapest products are in Groupon’s marketplace, but I question how they’ll actually manage that. I also feel that the commission rate of 15% will have to come down over time, similar to how commission rates for daily deals have dropped over the years. Eventually retailers will look at profit margins and performance vs the ability to quickly boost sales.