Groupon launched its first national deal today, partnering with Gap to offer $50 worth of apparel and accessories at the low price of $25.
The site is known for its local daily deals, often offered by small businesses including restaurants, gyms and spas. With a $1 billion valuation and more than 9.4 million Groupons sold since its launch, it has become one of the most recognized group buying sites on the web.
The company has had great success selling local deals, but this experimental partnership could be the first step towards larger, national partnerships.
We spoke with Julie Mossler, a spokeswoman for Groupon, to get some insights into Groupon’s motivations for testing out the national market. She explained:
“Local ‘brick and mortar’ businesses are the foundation of Groupon, and that isn’t changing. Many of our customers have asked for a national deal, so we’re testing the waters with Gap. It’s a perfect back-to-school deal, and a great way for us to reach subscribers in Gap cities where Groupon hasn’t yet launched. Customer feedback (positive or negative) will be taken into consideration when we determine if we’ll do partnerships of this scale in the future.”
Groupon CEO Andrew Mason expanded, “We’ve worked with plenty of national brands, but this is the first time we’ve featured the same business in every city simultaneously. We’re constantly experimenting with new types of deals and stick with whatever our customers like! They seem to like this deal.”
As of about 5 p.m. ET, the Gap deal has already triggered nearly 300,000 purchases — that’s about 10 Groupons per second, making it Groupon’s bestselling deal since its launch in November 2008. The previous bestseller was a $12 75-minute architecture tour by boat in Chicago (valued at $25), which sold 19,820 Groupons (although, it’s not exactly a fair comparison, as the boat tour deal was only offered in one city rather than nationwide). Mossler remarked:
“Although, it’s important to note we haven’t offered one at this scale before. Customers are getting their Gap on with Groupon because it’s such a compelling offer for back to school. We attribute the rate of sale to Groupon promotional handles on Facebook/Twitter, distribution via @earlybird, a blast to Gap’s newsletter subscribers and word of mouth from our 10 million subscribers in North America.”
The discount is also being promoted via Twitter’s Earlybird Offers account. Mossler commented, “We’re looking to get as much exposure for the deal as possible, and @earlybird is one strategy we hope will prove to grab Twitter users who haven’t yet given Groupon a try.”
Gap has been stepping up its social game as of late, making headlines earlier this week when it announced a 25% discount for Foursquare users who checked in at one of its retail locations in the U.S. or Canada. Olivia Doyne, Director of Engagement Marketing at Gap gave us a bit of insight into why the national retailer decided to host a Groupon deal:
“We’re always looking at new and innovative ways to connect with our customers, and we know many of them are Groupon subscribers. We thought the timing of our exclusive Groupon offer would be ideal as people begin to build their back-to-school and fall wardrobes.”
Although the deal is clearly a success on Groupon, Augustine Fou, the chief digital officer at Omnicom’s Healthcare Consultancy Group, commented that this is a prime example of “when NOT to use Groupon” as an advertiser. He commented, “Groupon is great for restaurants who have the margin to do it and who need publicity because people are not aware, but not for a big brand like Gap. It is simply a waste of money for them.”
Gap is receiving a lot of word or mouth and press, sending more buyers to the deal. This may seem like good news for Gap, but Fou argues, “The more press they get, the more money they lose.” With the current sales of around 300,000 Groupons, that translates into a $7.5 million revenue loss for one experimental campaign. That’s a hefty lump of cash, and the deal isn’t even over. “It’s still a better use than wasting $7.5 million on TV ads.” Fou added, “At least they did capture the other half as ‘money spent [by customers],’ and consumers will eventually go into the stores. For TV advertising, there is never proof anyone ever saw it, let alone went to the store.”
When asked if Gap had expected such a huge response to the deal, Doyne responded, “Since this is the first time Groupon has done a national deal of this size, it was hard to estimate the outcome. We’re really pleased with how many people have taken advantage of the offer.”
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