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Groupon pushes into flash sales to reinvent daily deals model

Groupon’s $43 million acquisition of apparel flash sales site ideeli is the latest step in how the daily deal juggernaut is continuing to reinvent itself into a mobile-driven business.

Groupon has been making a big bet on mobile in the past year to reposition the company as more sales take place through smartphones and tablets versus email. The acquisition of ideeli puts the company head-to-head in competition with Gilt, Rue La La and others that have already established a strong presence in mobile commerce.

“We’ve seen our customers respond very favorably to high-end apparel deals that we feature through our Groupon bid site as well as our Groupon Reserve channel,” said Nicholas Halliwell, manager of public relations at Groupon, Chicago.

“While ideeli will remain a stand-alone entity, they will help us further extend our reach into the fashion and apparel space,” he said.

“We expect that since we are deepening our relationship with hundreds of the top brands in fashion through this acquisition that inventory will also be featured in the Groupon mobile app and Groupon’s Web site.”

Grabbing flash sales?
Ideeli claims to be one of the largest independent fashion sales sites in the United States and has already carved out a strong mobile offering with iPhone and Android apps.

Half of ideeli’s inventory is from women’s apparel brands, and the remaining 50 percent of business comes from accessories and home décor items.

As Groupon looks to expand into new products and categories, the ideeli acquisition helps the company fill out its fashion and accessory inventory.

The acquisition also puts Groupon in direct competition with Gilt, Rue La La and other flash sales sites since fashion brands have another platform available to offer deals.

Although interest in the flash sales industry has dwindled down in the past couple of years, fashion and apparel brands continue to rake in significant sales with personalized product recommendations, especially on mobile.

In fact, Black Friday this year was the biggest day of mobile revenue at Gilt (see story).

“Groupon is clearly chasing Rue La La here, and this acquisition brings Groupon into the fray as a player in the wholesale/retail space, rather than continuing to serve as just a broker, taking a percentage of each transaction,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston.

Mr. Kerr is not affiliated with Groupon. He commented based on his expertise on the subject.

“Groupon bought ideeli for a song, and by pouring these deals into their stream of offers, might be able to generate some real revenue not just from the percentage they typically take for serving as the conduit, but on the markup on the actual goods sold,” he said.

Betting on mobile
Since ousting CEO/cofounder Andrew Mason in March, Groupon has been actively building up its mobile chops to extend its presence into the real world.

In November, Groupon partnered with Sparkfly to offer merchants real-time transactional data to help close the loop on offer redemptions (see story).

In September, Groupon acquired same-day hotel booking app Blink to beef up its Groupon Getaways content (see story).

At the same time that Groupon is switching its focus from daily deals to flash sales through the ideeli acquisition, both LivingSocial and Fab have recently laid off top executives as sales begin to dip.

This week LivingSocial’s CEO Tim O’Shaughnessy announced that he will leave the company sometime in the first half of the year when the online deals site finds a replacement.

Similarly, has gone through a number of layoffs in the past year as the company struggles to pivot from a purely daily deal model. In November, cofounder Bradford Shellhammer left, and the company laid off more than 100 employees last summer.

These layoffs point to the challenges that flash deal sites have had in keeping consumers’ attention with relevant, exciting deals.

By adding more categories to its inventory, Groupon could potentially differentiate itself more by leveraging customer data to better segment offers.

Atul Sabharwal, founder of Snipp Interactive, Washington, believes that the key to Groupon getting flash sales right will be the company’s trove of data.

Mr. Sabharwal is not affiliated with Groupon. He spoke based on his expertise on the subject.

“While the existing players only have data on past purchases of product on their platform, Groupon should be able to associate past purchases on ideeli with purchases on Groupon to create far better personalization and user specific offers,” he said.

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York