Will Local Businesses Grow to Love Groupon?
The first mover in digital fire sales, Groupon (NAS: GRPN) , has had enough of the horror stories coming from its business customers. It doesn't want to hear about the small British bakery that was inundated with orders for 102,000 cupcakes, way beyond the scope of what the confectionery could bake, and which ended up losing a full year's profits. Groupon understands that in the long term, it will only be successful if its clients are successful, so it is shifting its business from a coupon provider to be a local business's best friend.
The telltale acquisition
Groupon just purchased FeeFighters, a website that allows businesses to comparison shop for credit card processing. There's a reason some small businesses abhor credit cards, especially for small transactions: A proportion goes to the credit card processors, and that can add up. FeeFighters claims that on average, businesses save 40% on credit card processing bills when using its service. So why would Groupon want to buy FeeFighters?
Because it seems Groupon is shifting toward offering a set of services that local merchants can adopt to better run their businesses. Along with FeeFighters, Groupon released a free scheduler to small businesses in order to help manage online bookings and appointments. Groupon will be able to reap the goodwill from businesses that use its tools, while opening up communication for a continued relationship with the merchants.
It's clear that CEO Andrew Mason meant the words in his letter that was filed with Groupon's IPO: "Expect us to make ambitious bets on our future that distract us from our current business. Some bets we'll get right, and others we'll get wrong, but we think it's the only way to continuously build disruptive products." Groupon isn't content to rest with the business model that is widely criticized as easily cloned and without much of a competitive advantage. And it shouldn't be content, with a behemoth like Amazon.com (NAS: AMZN) running its own daily deal site, AmazonLocal, while still keeping its $175 million investment in LivingSocial. Google's (NAS: GOOG) GoogleOffers, which began last May, just expanded with 11 new partners and four new cities, giving it a marketplace of 40 cities.
Of course, this means if you invest with Groupon, you are counting on whatever potential genius idea Andrew Mason uncovers. Will a focus on providing beneficial services to businesses outside of Groupon's work in the long run? I believe it can't hurt, and I can't wait to see what else distracts Groupon from coupons.
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At the time this article was published Fool contributor Dan Newman admits to buying a few Groupons. He holds shares of Amazon.com, but no shares of the other companies mentioned above. Follow him @TMFHelloNewman.The Motley Fool owns shares of Amazon.com and Google. Motley Fool newsletter services have recommended buying shares of Google and Amazon.com. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.