Groupon Inc (NASDAQ:GRPN) is moving away from being an email-based “daily deals” company to more of an e-commerce platform, but this transition is not easy, as it is increasingly facing threats from established and bigger rivals. The latest threat to the company comes from Twitter Inc (NYSE:TWTR), which just introduced a new online coupon system, a new commerce tool from the company after the “Buy” button.
Groupon shares unaffected
The news did not have any major impact on Groupon stock, which was down by .66% yesterday, while Twitter shares were up by almost 2%. The new tool from Twitter is undergoing tests and allows merchants to use the platform to advertise their goods and offer discounts to customers. The offers are added to the credit/debit cards of customers, which then can be used while making purchases through stores. Later it will be reflected in the card statements of the buyer.
For the redemption of offers, merchants can also use their existing payment network. Twitter Group Product Manager Tarun Jain said the outstanding feature of this service is that it does not require any special training for employees, nor does it require any software or hardware to be installed. The customer process too does not change.
Viability of coupon-based business model?
Even though it’s a good move by Twitter, the decline of Groupon does hint that online coupons may not be successful after all. Apart from Groupon, we have more example such as Foursquare and other geolocation apps which failed to attract users primarily due to privacy concerns. Integrating brick-and-mortar stores with the internet is not an easy thing, and the same feeling is shared by the principal analyst at Forrester Research, Sucharita Mulpuru. The analyst believes that the latest move from the micro-blogging platform may not catch on.
“It seems like this is a mashup of so many ideas that have been tried before, and none of them have been wildly successful,” she says.
Groupon came into the picture nearly six years ago, and since then, numerous competitors have emerged in the market in the form of e-commerce advertising sites. The company reported mixed numbers for the third quarter of fiscal 2014 and is trying a lot to shift its business model from an e-mail-based list of “daily deals” to a more fully featured e-commerce business. Groupon seeks to expand its operations in Asia as well.