There’s a lot of changes in store for Groupon.
First, Groupon announced a major leadership change Nov. 3, naming a new CEO who took over for Eric Lefkofsky, Groupon’s co-founder. Effective today, Rich Williams, the company’s Chief Operating Officer, took reins of the CEO role. Lefkofsky will return to his board chairman role.
But that was just the tip of the iceberg.
Following a few struggling quarters, Groupon’s executive team has recognized what has finally come to light: Groupon needed a more focused direction in order to keep its marketplace viable. That’s why during its third-quarter earnings call with analysts today the words “new Groupon” were tossed around.
Both Lefkofsky and Williams were on the call, which was full of blunt honesty that Groupon had simply stretched itself too thin and jumped into too many sectors. Now, Groupon is walking away from markets that aren’t doing well and shuttering sections of the business that aren’t up to par.
Williams noted specifically that Groupon will re-envision its shopping business, and its overall local marketplace strategy as a whole. Instead, Groupon plans to focus on a stronger product mix that produces higher margins.
Groupon’s changes come during another mixed quarter for the deals commerce marketplace that hit $713.6 million in revenue, which was shy of Wall Street’s expectations. On a 12-month basis, Groupon hit $1.4 billion in gross profit. The company posted a gross profit of $328.9 million for the quarter.
“We’ve successfully transformed Groupon to support our next stage of growth. The business is stable, the marketplace is scaling, and we are ready to take our next big step. Now is the right time for me to return to my role as chairman, and let Rich, who has done a tremendous job over the past four years, lead Groupon during this next stage,” Lefkofsky said in the company’s prepared news release.
Lefkofsky has served as CEO since February 2013, when he took over for Andrew Mason in a time when Groupon was also in a downturn, looking for change. He was later named permanent CEO.
“I’m a builder and feel like I’ve done all the building here I set out to do and Rich is a better operator and a better manager and has spent a whole career at both,” Lefkofsky said in an interview.
Speaking specifically toward the new leadership transition, Lefkofsky provided his full praise for Williams.
“Cracking the code in local commerce is not easy. We’ve come a long way in building a leading local commerce marketplace in the last two years,” Lefkofsky said. “With his deep experience in eCommerce — both in and outside of Groupon — and expertise in marketing, operations and technology, Rich was the obvious choice to lead Groupon.”
Just hours into the role, Williams appeared ready to take the baton and hit the ground running.
“To enable that growth on a larger scale, we are focusing on three strategic changes. First, we need to dramatically shift our marketing strategy to drive millions more new customers to our marketplace. Core focus and investment in new customers isn’t a ‘nice to have,’ it’s a requirement for accelerated growth. Second, we need to further simplify and streamline our business. In particular, our international markets. This means more shared services for economies of scale, and it means picking our battles,” he said during the call with analysts.
“These are admittedly major shifts in our strategy for Day 1 on the job, but I’ve been here for four years. I don’t need 100 days to know that these are the right choices.”
He noted that Groupon’s strategy is doing something right — as it has sold nearly 1 billion Groupons to date. Still, the company needs a sharper focus, more attention toward marketing and customer attrition, and more focus on higher-margin goods.
“I’m assuming the CEO role with three immediate priorities,” Williams said in his prepared remarks. “First, we will renew our investment in customer acquisition to introduce more new customers to our marketplace and accelerate growth. Second, we will increase our focus on streamlining our international operations to ensure we are operating as lean and efficiently as possible. Finally, we will shift our Shopping category away from lower margin ‘empty calorie’ products to grow a sustainable, healthy Goods business with stronger margins.”
Williams plans to tap into his marketing officer (he was Groupon’s Chief Marketing Officer when he was hired), to increase marketing spending in order to bulk up Groupon’s user base. He also noted during the call that Groupon will put more stake in its Good business, which is its side of the marketplace that sells physical products.
Prior to his COO role, Williams was Groupon’s President of North America since 2014, when he played a key role in the company’s transition to a full mobile local commerce marketplace. He joined the company in June 2011 as Senior Vice President of Marketing with nearly 20 years of experience.