Groupon must be getting used to losing things. The online coupon purveyor announced that Marc Samwer, the head of its crucial international business unit, will be leaving the company. Considering that the firm -- which lately announced it would restate its recent accounting and hasn't yet posted a profit -- badly needs stability, the timing of the departure is awful. But the company has deeper problems to address.
Home is not where the high growth is
Losing such a top-level executive would be a blow for any firm. It's much more so for Groupon -- particularly when said exec is in charge of foreign business, which comprises an exponentially increasing share of company revenue. In the fourth quarter, the take from outside of North America totaled $312.5 million, while domestic revenue was a notch under $180 million. By contrast, in the same period the year before those numbers were much more even ($88.3 million and $83.8 million, respectively).
In other words, foreign sales have quickly outpaced domestic to account for nearly two-thirds of the company's revenue. In fact, for fiscal 2011, overseas revenue grew by 767% -- the hare to domestic's 217% tortoise.
For Groupon, overseas success is critical if it's to turn its business around and start making a profit. Meanwhile the competitive edge that helped produce those zooming revenue increases is dulling quickly.
Here come the big boys
At least the company is plugging the hole quickly and sensibly. It has hired a new international chief, Veit Dengler, with years of experience in the tech space selling American wares to clientele abroad. He was formerly Dell's (NAS: DELL) head of Eastern European and Russian operations. The big American PC retailer does solid business abroad: This past fiscal year it brought in $31.6 billion from foreign sales, or 51% of its grand total for the year.
Dengler's new job won't be an easy one to do well. Groupon's big disadvantage is that its business model is very easy to replicate; all a competitor really needs is the talent to craft good deals with local enterprises and a solid platform on which to offer the resulting coupons.
Ominously for Groupon, some of the web's biggest heavyweights have realized this and are reacting accordingly. Amazon (NAS: AMZN) now offers daily deals through its Local sites targeted to particular American markets. These deals routinely offer discounts of 50% or more on food, drink, and merchandise, and the Locals cover nearly every major U.S. municipality.
Never to be outdone in the Internet space, Google (NAS: GOOG) has gotten in on the action, too. At last count its deals can be had in more than 40 cities from New York to Los Angeles. Like Amazon and Groupon, these coupons offer compelling discounts on swag and services.
If those two powerful companies have been able to get up to speed so quickly on the domestic market, how far behind can foreign versions of their deal sites be? Probably not far at all. Deal-hunting is a universal pastime, and the $300 million-plus Groupon made last year from foreign coupons represents a market too juicy to ignore.
Top-level executive departures are painful for any company. The timing of this one, though, is particularly hurtful. Groupon needs all the stability and talent it can get; the competition is coming, and the ensuing fight's going to be a hard one.
Groupon's not the only company struggling to turn a profit in the tech space; it's a tough sector to compete in. But we've got the skinny on a company that's pouncing on the latest developments. Find out which firm that is in this free report.
At the time thisarticle was published