Steve Montgomery

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...]

The cost of generating the sales may seem high but will depend of a variety of issues. Including the following:
- Did the GAP acquire new customers?
- Did the GAP get some former customers to return to their stores?
- Did the customers buy more than the $50 and thus mitigate some of the cost?
- Of the new customers what is their conversation rate to on-going customers?
- Did they increase the likelihood of former customers increasing their spend with The Gap?

The issue is not the cost (although the retailer has to be able to fund it). The real question is the return on investment. Given some of the earlier comments, I believe this test is worth the attempt by both Groupon and The Gap.