In the wake of disappointing Q3 results, Groupon has found itself in a cost-cutting plan, with interim CEO Dusan Senkypl disclosing a shift towards a top-line first model. Acknowledging challenges in progressing cost structure improvements, Senkypl expressed concerns about the ongoing business challenges.
During the earnings call Thursday (Nov. 9), Groupon announced plans to improve its customer experience and bolster its presence in the gifting sector through various initiatives.
“We believe that we could have development time and a quicker release. This can help us provide a much better customer experience over time,” Senkypl said.
Groupon aims to introduce new features weekly, rapidly achieving feature parity in North America and international markets. The company envisions providing a seamless gifting experience for customers through a new consumer front end. This project involves about 100 individuals and initially had a two-year projected timeline. However, the team set an ambitious goal of six months for completion, ultimately opting to delay the full rollout until the first quarter to mitigate risks during the peak season.
In addition to the updated front end, Groupon’s product and engineering team is actively involved in various platform initiatives. These include creating new deals, revamping the Merchant Center to align with the new front-end architecture, improving the marketplace support ecosystem, and introducing a redemption API to streamline voucher redemption processes.
Senkypl noted that upon the review of the company’s performance, he observed that Groupon faced challenges during gift-giving seasons, citing a lack of the typical boost seen in other marketplaces. In response, Senkypl sees a strategic growth opportunity in repositioning Groupon to have a more prominent role in gifting.
Initiatives have been launched to improve Groupon’s appeal, including identifying numerous giftable deals, onboarding new merchants with selected giftable categories, and collaborating with existing merchants to enhance deals.
Despite delaying the new consumer front-end launch, Senkypl revealed that efforts are underway to adapt the legacy platform for a more gifting-friendly experience, integrating customized vouchers and themed Groupon gift cards.
Although it’s premature to assess the impact of these initiatives in the current Q4 season, Senkypl expressed the potential for gifting to emerge as a substantial business for Groupon, positioning the company as a top destination for giftable experiences throughout the year.
In the second quarter of 2023, Groupon reported global revenue of $129.1 million and global billings of $393.5 million. North America’s revenue declined by 15%, primarily due to decreased engagement, resulting in lower unit sales. International revenue also decreased by 19%, driven by a shift to lower-margin offerings and reduced focus on the Goods category. The company reported a net loss of $12 million but showed improvements in adjusted EBITDA, reaching $15.2 million.
North America’s gross profit decreased by 13%, and active customers declined by 3% sequentially and 19% compared to the previous year. Internationally, gross profit decreased by 22%, and active customers declined by 6% sequentially and 14% compared to last year. Groupon’s overall revenue and gross profit for the quarter were down by 16%.
Over the trailing 12-month period, Groupon reported an operating cash flow outflow of $146.3 million and free cash flow outflow of $172.1 million. As of June 30, Groupon had $118.1 million in cash and cash equivalents.