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Groupon tests app-based ordering system in St. Louis

Ecommerce marketplace Groupon is reinforcing a commitment to amending its mobile presence by debuting the Groupon To Go delivery service in its third market, St. Louis.

Subscribers to Groupon’s app in St. Louis can now join users in Denver and Chicago in ordering food for delivery from participating restaurants in their area, much in the same way that established players in the sector such as Grubhub Seamless and Yelp-owned Eat24 operate in many markets. Groupon’s late entry into online and mobile food ordering could make Groupon To Go’s growth an uphill battle as the company struggles to find alternate revenue streams.

“Offering an on-demand food services delivery is a natural extension for the brand,” said Michael Becker, managing partner at mCordis. “In fact, it is critical that they provide on-demand services, as personalized, individual treatment, is becoming an consumer expectation from players like Groupon.”

Desperate for growth
Groupon has perennially struggled to turn a profit as its business model ages poorly. Groupon’s original business model involved the extensive use of email to blast out deals for local businesses— an approach that consumers are looking increasingly at as spam as time goes on.

The company’s history tells a tragic story of overvaluation and corporate mismanagement.

Beginning as a fledgling startup in 2008, Groupon quickly rose through the ranks to become one of venture capital’s most talked about companies in just a few months, famously earning description as “The Fastest Growing Company Ever” by Forbes. So great was Groupon’s ascent that it even rejected a landmark $6 billion takeover offer from Google in 2010.

However, rumors of a bloated valuation dogged the company come 2011, and within a year of the company’s disastrous IPO that year its share price had dipped to two-thirds of its original $20 valuation. (Groupon currently sits at $4.90 a share).

Combine the falling shares with turnover at the CEO position in the past five years, and consumers are left with an image of a company desperate to find revenue streams as their easily-replicated bread-and-butter is being capitalized on by everything from other startups to newspapers.

Users in St. Louis will be prompted to sign up for Groupon To Go

Too little, too late?
Groupon To Go puts the floundering company in direct competition with mobile ordering giants Grubhub Seamless and Eat24. Groupon, which may have the resources to attain the economy of scale required with such a vast operation, may still be woefully outmatched by its competitors by virtue of its late entry.

While the company is testing mobile ordering in just its third market under the Groupon To Go banner, it has a mobile ordering presence in around forty markets through its acquisition of OrderUp, a food delivery service based in smaller markets that is embroiled in its own measure of controversy.

However, the widespread availability of mobile ordering through providers such as GrubHub Seamless, which operates in over 1,000 markets, makes Groupon’s offering look meager in comparison.

In addition, Groupon’s lack of presence in large markets such as New York and Los Angeles will make penetration a challenge as time goes on and users become entrenched in mobile buying habits.

As marketers and investors are sure to be trying to divine Groupon’s chances of success in this latest endeavor, it is sure be an interesting storyline within Groupon’s larger narrative of tech redemption.

As Groupon continues its own innovation in the mobile space, it leverages new features developers place at its disposal. Earlier this year, it fueled engagement with its iOS mobile application by incorporating 3D Touch to further highlight daily deals and offer more user interaction (see story).

And the company is also using partnerships to its advantage: it recently partnered with and in supporting mobile coupon application Ibotta’s shift into in-application rewards, urging more users to start spending on mobile after consumers have become more comfortable with the experience (see story).

“Offering Groupon Togo makes perfect sense for Groupon, especially given their decision to partner with OrderUp to help facilitate deliveries,” Mr. Becker said. “With this arrangement, Groupon is aligning their marketplace scale and expertise in pairing individuals with businesses and offers with OrderUp’s food delivery experience and knowledge.”

“Simple and straightforward designs and clear and transparent offers will be important, but the key to success will be in the execution. It will be critical for them to keep the ordering process to be simple, delivery timely and fulfillment errors to a minimum.”