Thursday, August 19, 2010

Groupon Meets The Gap—The Old and New Combine…

The Groupon on August 19, 2010 represents a potential inflection point of sorts in retailing and the Internet. While we have been watching and marveling over local Chicago area upstart Groupon for the past few years (and have written about them several times), their Gap offer today represents a new direction for them. Groupon represents a unique combination of many of the unique aspects of the Internet—social media, group buying dynamics, and limited time discounts—into one package. A Groupon deal of the day is typically half-off or more a product or service geared to a local audience. Until today, the offers have primarily been geared around service offers—spas, nail salons, yoga classes, etc. More successful offers have been around discounted memberships to the Art Institute in Chicago or esoteric pursuits like skydiving classes. Sporting events, restaurants and food offers have also experienced huge impacts with Groupon offers. To date, however, these efforts have occurred on a highly localized level, generally geared towards small business within a limited geography. So, while Groupon has grown explosively (a quick glance at the website shows Groupon operating in 91 US cities and 21 countries around the world), the offers have always been geared at the local level in whatever city it’s been focused in.

Today’s offer with The Gap is typical in many respects in its structure—$50 worth of Gap merchandise for $25.

It is very atypical for several reasons:

This is a national Groupon. We did a quick check in several cities and saw the same offer around the country.

It’s the first deal we know of for a national chain the size and magnitude of Gap

Like most Groupon deals, this one tipped, and tipped early. Groupon typically displays the number of coupons purchased, which makes it easy to do the math and figure out the dollar value. Interestingly, they chose to eliminate the number and most individual cities simply say that thousands have been purchased. At 8:30 a.m. in Chicago, 8300 Groupons had been purchased, which quickly translates to over $200K in value. And most users were not even awake! On a national basis, we suspect that this will be a real test of the Groupon bump—can they move the needle on a chain the size and magnitude of The Gap? The potential dollar amount will be huge—certainly in the millions…

Perhaps today is Groupon’s coming of age, in combination with one of brick and mortar’s most venerable (but troubled) brands.