Groupon IPO: Customers Will Benefit

 NEW YORK (TheStreet) — Groupon is looking to raise $750 million through its impending IPO, giving the company capital to continue to build out its business and providing a windfall for its owners.


Groupon, leader in the crowded daily deals space, filed its IPO paperwork Thursday.

Sucharita Mulpuru, principal analyst at Forrester Research, said she does not expect consumer experiences to change significantly with a publicly traded Groupon, which touts total savings of more than $2 billion on it Web site, but not all market watchers agree on that point.

“Going public will probably accelerate the evolution of the deal-a-day industry,” BIA/Kelsey analyst Peter Krasilovsky told TheStreet.

What was once just two or three deals a day, delivered to consumers via email, has already bloomed into a much more robust offering, Krasilovsky explained.

Groupon, which will trade under the ticker GRPN, specializes in local advertising, where merchants offer daily deals that the company sells to its subscribers. Groupon said it has 83.1 million subscribers as of March 31 — a big jump from the 1.8 million it had at the beginning of 2009.

Krasilovsky said Groupon’s margins have been changing over time in the fast-evolving daily-deals market, where the company typically takes 30% to 50% commissions on the deals it sells.

With increasing competition in the market from other firms like Living Social and BuyWithMe, the deal-a-day sites need to offer consumers deeper and deeper discounts to keep them coming back, and that could lead to the companies themselves having to accept slimmer margins,

“People used to be happy with 50% discounts,” Krasilovsky said. “Now they expect more 60% and 70% discounts. Groupon must be willing to eat that money just to keep that volume.”

A publicly traded Groupon is also likely to increase the number of national businesses it partners with, similar to recent deals with retailer Gap(GPS_) and sandwich chain Quizno’s.



>> Groupon: Will It Commoditize Retail?

As of last December, Groupon said that 15% of its business partners were national companies trying to better target local markets. “Theoretically, that could be an increasing part of this growth,” Krasilovsky said, and national chains are better equipped to manage slimmer margins anyway.

Score another point for Groupon’s money-saving customers.

By Miriam Reimer  via The Street 06/02/11 – 05:26 PM EDT


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