Phil Rubin

Groupon's First National Deal Blows Out

August 23, 2010

FROM RETAILWIRE:
Groupon Inc.'s first nationwide deal -- an offer from the Gap for $50 worth of merchandise at $25 -- sold 445,000 vouchers for the retailer last Thursday, bringing in $11 million in revenue. What do you think of the potential for national deals from daily-deal websites such as Groupon?      [more...]

Last week it was Groupon and this week Gap is out with its "Gap Give and Get" promotion which is only 35% off (30% to the customer and 5% to a non-profit). Gap's brand is less than relevant these days with a lot of consumers and their aggressive promotion is not going to hurt them. For Gap it's volume and an opportunity to acquire new customers, much as the rest of the comments reflect. Plus they likely got some incremental lift beyond the $50 so the loss might not be as great as analysts think (hopefully Gap and/or Groupon will let us know!).

The other interesting thing to consider is whether Gap comes back to Groupon. While Groupon is hot, it remains to be seen whether marketers will return to spend money on a breakage model for customers that might not be profitable beyond the initial promotional transaction.

In a soft economy it's one thing, in a better retail environment 50% markdowns are more questionable.