Digital

Groupon is bypassing Expedia to sell travel directly to consumers

Aug 14, 2012 4:39 am

Skift Take

In its direct-travel sales, Groupon could be taking a page out of Expedia’s playbook — partner with a company, learn the ropes, and eventually shut them out and do it on your own.

— Dennis Schaal

Free Report: The State of Student Travel


Groupon is increasingly selling travel vouchers directly to consumers and, and in these instances, shutting out its middleman, Expedia.

CFO Jason Child noted that Groupon’s “direct revenues” from physical goods, travel vouchers and movie tickets in the second quarter for the first time became material to the company’s financial results.

That means these direct sales are becoming a big part of Groupon’s business and the trajectory means they are increasingly strategic.

In these cases, Groupon “takes title” to the inventory and becomes the merchant of record, Child said.

Direct sales leave Expedia on the outside looking in

That contrasts with the Groupon Getaways with Expedia, a service launched in July 2011,  in which Expedia is often the merchant of record and Groupon has to share revenue with the online travel agency for hotel and vacation package deals.

It was previously known that Groupon has its own sales force — distinct from Expedia’s efforts — signing contracts with travel suppliers, but now it is confirmed that these direct sales are becoming a much larger part of the business.

In the second quarter, Groupon’s direct revenue rose 242% to $65 million, compared with the first quarter of 2012.

Although more than half of this direct revenue was for the electronics, clothes, silverware and other goods that Groupon sells, the direct travel sales have to be rising, as well.

Groupon unveiled these numbers August 13 as part of its second quarter results.

Profitable quarter but short on expectations

Although Groupon achieved its first quarterly profit, $33.5 million compared with a loss of nearly $110 million in the second quarter of 2011, its share price plummeted about 23% because its revenue, at $568.3 million, fell short of consensus estimates.

“We had a solid quarter despite challenges in Europe and continued investment in technology and infrastructure,” said CEO Andrew Mason, during a presentation for investors. “We’ve deepened our relationships with a growing base of merchants and customers worldwide, demonstrating progress as we work to unlock the opportunity in local commerce.”

Mason noted that the impact of the financial crisis in Europe could be felt in some of Groupon’s higher-end deals, including those for upscale hotel stays in places such as Monaco.

Laser hair removal and Monaco hotel stays

“While deals such as laser hair removal and luxury hotel stays in Monaco get Groupon an element of serendipitous discovery that is key to our brand, we have also found that these more discretionary offers are more susceptible to negative demand elasticity over the past few quarters as macroeconomic conditions have deteriorated,” Mason said.

In addition to problems with pricey laser hair removal deals, Groupon would like to eliminate the hassles of dealings with its six technology platforms in different parts of the world.

Mason said it is working on integrating them so it can innovate faster but “they aren’t one quarter changes, and it would be foolish for me to speculate on exactly how long they’re going to take.”

 

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