Groupon Goes Grocery Customer Shopping

Discussion
Jun 07, 2011
George Anderson

In yesterday’s discussion on Groupon’s initial public offering and the prospects of the company going forward, Max Goldberg, founding partner of The Radical Clarity Group, wrote, "They have changed the nature of retailing. They kicked off a wave of deep discounting. They developed a system for local merchants to effectively reach and activate consumers other than community newspapers and direct mail. … I look forward to seeing how they fine-tune the service and enhance local retail."

Today, we have some insight into what that fine tuning might mean with reports that Groupon is working with the 61-store Big Y grocery chain. The deal is different for a number of reasons beyond this being the first time the daily deal site has included an offer for a mainstream supermarket. According to the Chicago Tribune, Groupon did offer a discount to the upscale Fox & Obel market in Chicago in 2010.

The new offer gives consumers the opportunity to purchase a "Shellfish Grill Pack" for $24 rather than the normal $39.99. Shoppers that want the deal are asked to enter their Big Y loyalty card number for instant credit when they check out. It is a departure from typical Groupon transactions where consumers either print out a paper coupon or use a digital version on their mobile phones.

Groupon worked with Incentive Targeting, a technology firm specializing in shopper marketing, on the Big Y offer.

Ben Sprecher, founder and VP, marketing at Incentive Targeting and a RetailWire BrainTrust member, told Crain’s Chicago Business that the typical Groupon paper coupon offer doesn’t work for companies similar to Big Y. "Large retailers with multistore environments with multiple checkout lanes like grocery stores measure delays in thousands of dollars per second," he said.

An article on the Advertising Age website suggests that the Big Y deal offers the prospect of a bigger and different future for Groupon as it goes head-to-head with coupon companies such as SmartSource and Valassis.

The deal, according to Ad Age, "potentially removes key obstacles that have kept it out of the multibillion-dollar national-promotion budgets of packaged-goods marketers." Going forward, Groupon could strike deals with large retail chains to bring in multiple consumer packaged goods brands for merchant-specific promotions.

Discussion Questions: Does the Big Y/Groupon deal have the potential to change coupon distribution in mainstream grocery environments? What do you think it means for retailers, CPG brands and others in the coupon distribution/redemption arena?

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11 Comments on "Groupon Goes Grocery Customer Shopping"


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Doug Stephens
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Doug Stephens
9 years 11 months ago

What’s interesting to me is that when we talk about Groupon, what we most often focus on is the discount aspect of the proposition–as though Groupon invented the principal of deep discounting–which of course they did not. Where I feel Groupon really has made a mark is in democratizing the marketing reach of small retailers. Where a little guy could only potentially reach a small number of customers efficiently, they can now access thousands or potentially even millions of customers quickly. This is a significant shift and far outweighs the importance of what gets discounted and by how much.

Lisa Bradner
Guest
Lisa Bradner
9 years 11 months ago
Groupon’s model is similar to what Cellfire has been doing in mobile coupons and what Kroger has executed with Shortcuts, cellfire and dunnhumby. Not revolutionary on Groupon’s part but smart and finally delivering on some of the promise of a loyalty card program that most grocers have never been willing and able to deliver on. Certainly all of these connect back to customer data to answer the million dollar question of whether you can discount your way to creating a loyal full price paying customer–or are you just discounting behavior that would have happened anyhow? Critical to the logic of the Groupon business model overall. Several big questions are not yet resolved: What to do about big retailers for whom having a loyalty card fights with their overall business strategy (hello, Walmart!) and will grocers be any better about sharing data from their loyalty programs with Groupon and brands than they have been in the past? Small regional chains trying to get a leg up on their price competition will be more likely to do… Read more »
Max Goldberg
Guest
9 years 11 months ago

Groupon’s entry into promotions with mainstream grocery chains is good for consumers, retailers and brands. Grocers can target higher margin areas of the store with bundles of products. Brands have another avenue to work with retailers to directly drive sales. And consumers benefit from lower prices on select items and save time by not having to print out the coupon and remember to take it to the grocer.

Groupon, LivingSocial and the other couponing sites are changing the way consumers shop and their expectations. In many ways, they have only scratched the surface of what they will bring to the marketplace.

Tony Orlando
Guest
9 years 11 months ago

It feels like the movie “Groundhog Day” with this Groupon stuff. As I said yesterday, the uniqueness of it is not there; the shellfish package deal does not set the retail world on fire. We as supermarket operators can not give the farm away, but we can discount our high margin, high-end items to test the waters. If a supermarket ran 50 lbs. of ground chuck for $79.99, then the store would be swamped with cherry pickers, BUT the bottom line would get crushed. Sorry, I don’t see any happy ending for supermarkets in this, in terms of a huge positive profit impact. I’ll stick with my hot meat deals in my ROP paper.

Merle Zamansky-Coen
Guest
Merle Zamansky-Coen
9 years 11 months ago

Absolutely. Load to card is happening on many levels. This is a new avenue to explore. It provides the convenience shoppers need today.

Ed Rosenbaum
Guest
9 years 11 months ago

What we have here is another way to bring shoppers to your store. Isn’t that what we want?

Bob Phibbs
Guest
9 years 11 months ago

Groupon and the clones are changing every customer interaction — and not for the good. A guy can walk down the street naked and get great exposure, but who wants to invite him to dinner?

Doug Fleener
Guest
9 years 11 months ago

Okay, Bob’s comment made me laugh. I’m sure there are some people who might want to know what the guy looks like….but I digress.

I don’t think Groupon is going to change coupon distribution, but clearly they now have the ability to bring a massive number of people to a retailer. Yes, these are people looking to save a lot of money, but there is a large number of them.

The real opportunity in the grocery segment is to engage the customer and capture sales when the consumer is not in the store … and create incremental visits. I think it will interesting to see what the outcome is.

If a retailer is going to discount, it would seem this is a great way to do it to get new customers. Then again, I wouldn’t go down that slippery slope, but there are a lot of retailers who are already far down that road.

Roger Ach
Guest
Roger Ach
9 years 11 months ago

The Big Y/Groupon deal is just the beginning. LivingSocial is growing faster than Groupon, but from a smaller base.

Facebook will become a dominant player in this space. Our vADz.com is building a suite of apps to download and manage VideoCoupons, equipped with eCommerce for instant redemption.

Roger Saunders
Guest
9 years 11 months ago

I like the way that Big Y is controlling the flow of cash. The consumer enters their Big Y loyalty number, and then gets the discount. Now, Big Y can pay Groupon … that’s likely to be in a faster fashion than Groupon is paying retailers.

Smart move. Other retailers should take a page from this book.

Ben Sprecher
Guest
Ben Sprecher
9 years 11 months ago
(Disclaimer – I am posting this as a representative of Incentive Targeting, one of the companies at the center of this story.) Very interesting conversation here, and we see this as an exciting new opportunity for the non-mom-and-pop retailers of the world. Early indications on this deal–which was intended as a small scale test–are already quite encouraging, but the true value will become evident over time. By following shoppers’ behavior in the weeks and months ahead, we’ll be watching to see whether the Groupon shoppers bring enough value to Big Y to justify the steep discounts they received. A number of commenters have touched on aspects of the deal: discount size, load to card, data sharing, etc. One reason we’re excited to be piloting this at Big Y Foods is their commitment to data- and analytics-driven marketing. You can be sure that we’ll be measuring impact on recency, frequency, and spend and ensuring that any ongoing programs have a real, measurable, and positive impact on their bottom line. And for me, this is the real… Read more »
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