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Groupon bets on smartphone reservations, but challenges persist as mobile head departs

While Groupon continues to expand its mobile strategy – most recently with restaurant reservations on its iPhone application – the company will do so without David Katz, head of the consumer mobile division, who recently left.

The latest update to the Groupon iPhone app adds the ability for users to make, share and modify restaurant reservations at fine dining establishments as well as access discounts of up to 40 percent. The news comes at a time when Groupon’s mobile business is growing, but the company is without a permanent CEO or head of its consumer mobile business.

“Currently, almost half of all Groupon purchases occur on mobile, and restaurants represent one of the largest categories of Groupon merchants,” said Erin Yeager, communications specialist at Groupon, Chicago. “This launch brings subscribers an upscale selection of sought-after tables and a simple reservation process with discounts of up to 40 percent where it’s most convenient: In the palm of their hands.

“Groupon subscribers are incredibly active on mobile, and we expect to see a great take-up of the Reserve offerings,” she said. “Subscribers can now make, share and modify reservations on the go.”

Local business connection

The Groupon Reserve service was launched earlier this month on the Web. Users receive a discount off their entire check without the need for pre-payment or vouchers.

The service is currently available in ten markets: Atlanta, Boston, Chicago, Denver, Los Angeles, Miami, New York, Philadelphia, San Francisco and Washington. It is expected to be launched in additional United States cities and key international markets in the future.

Going forward, the company expects to expand the service to include offerings from top beauty, product, travel and entertainment brands, as well as similar reservations capabilities for spas, salons and hotels.

Groupon Reserve offers discounts at many fine-dining restaurants

Groupon is hoping Reserve will build its presence with local businesses by providing them with a tool for driving traffic during slow periods by using flexible pricing.

The reservation service will also be making its way to Android devices and the iPad soon.

Mobile growth

The news comes at a time when Groupon is seeing strong growth in mobile.

In March, the company reported that 45 percent of North American transactions were completed on mobile devices, compared with nearly 30 percent in March 2012. Just as importantly, North American mobile customers spend on average 50 percent more than Web-only customers, the company reports.

Additionally, less than 45 percent of Groupon’s North American transactions came from email in the first quarter, with mobile and search accounting for a greater percentage.

However, the company’s future growth potential is in question as the result of a couple of high-level departures.

A screenshot of Group Reserve

At the end of February, Groupon’s CEO Andrew Mason was fired following months of falling stock prices and questions about how the company would drive growth going forward. The company has put in place temporary CEOs, Ted Leonsis and Eric Lefkofsky, but does not expect to name a permanent replacement until next year.

This week, it was revealed that David Katz, who headed up the company’s consumer mobile division, has left. The company has already begun a search to replace him.

Complementary offerings

Groupon is clearly betting on mobile as a key part of its growth strategy. This makes sense because Groupon uses a primarily graphic format that works well in mobile, and it can use mobile to deliver local offers from nearby merchants.

Its mobile strategy includes selling merchandise through its Groupon Goods offering and encouraging users to leverage its app to find local deals when they are out and about as opposed to waiting to receive an email from Groupon with offers that may not be relevant.

Groupon is also focused on mobile point-of-sale services for merchants.

The Groupon Reserve service is a nice complement to these other offerings and also suggests that Groupon may be looking for a bigger role in travel-related services, where mobile has been growing quickly.

These strategies have been paying off, with the company’s stock rebounding somewhat in recent months.

However, Groupon still faces significant competition across all of these strategies, including eBay and Amazon in merchandise sales; Square and PayPal in mPOS as well as Yelp and foursquare with local offers, and OpenTable in mobile reservations.

Groupon is also dealing with waning interest in daily deals from consumers.

“We’re constantly striving to bring our subscribers memorable experiences and help them discover great local businesses at unbeatable prices,” Ms. Yeager said. “Integrating Groupon Reserve into our mobile app further diversifies options and introduces a higher-end selection.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York