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Groupon Quietly Launches Groupon Stores, a Marketplace for Its $2 Billion Goods Business

If Groupon's history was as a virtual coupon shop, it's future is starting to look more like a more traditional online store.

Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

If Groupon’s history was as a virtual coupon shop, it’s future is starting to look more like a traditional online store.

Case in point: The Chicago-based company has quietly started testing a new concept called Groupon Stores that will let just about any product brand or retail operation set up a Groupon storefront to sell their wares, sources tell Re/code. Groupon has been telling businesses that are part of the Groupon Stores beta program that the stuff they sell through Groupon has to be at least 5 percent cheaper than anywhere else on the Web, sources said. Groupon also has told businesses that it will take a 15 percent cut of these sales. Groupon PR chief Bill Roberts confirmed the new initiative, but said Groupon is still testing the right discounting and commissions structure.

“This is a huge, untapped opportunity for us to turn the Groupon marketplace into even more of an online and mobile shopping destination by increasing our inventory and bringing the power of our platform to even more merchants,” Roberts said in an email.

Much of Groupon’s overall growth has been fueled by the Goods business, which first launched in 2011 to offer discounted sales of consumer electronics, jewelry, clothing and other items. A year later, the Goods business accounted for 33 percent of Groupon’s total revenue. Last year, it totaled nearly 56 percent of total revenue. Goods revenue totaled $1.8 billion in 2014, up more than 55 percent from 2013. Groupon acquired discount apparel retailer Ideeli, now called Ideel, in early 2014 for $43 million.

The introduction of Groupon Stores follows the debut one year ago of a self-serve tool that local businesses can use to set up traditional Groupon deals on the fly without the involvement of a Groupon rep. Both that initiative and Groupon Stores are part of CEO Eric Lefkofsky’s multi-year mission to transform Groupon from a deals company that relies on email marketing to a shopping site that shoppers visit first whenever they need to purchase a service or product online.

Such ambition sounds foolish if you think this means Groupon wants to topple much bigger competitors like Amazon, which generates about 40 percent of its revenue from third-party sellers, and eBay. But Groupon doesn’t need to do that to become a legitimate online goods marketplace. Instead, it can capitalize on the overall growth of the e-commerce market and the relative slowness with which brick-and-mortar discount stores have grown their online stores and apps. Groupon’s iPhone app is currently the sixth-most popular in the Apple App Store.

“Unlike Amazon and eBay, the Groupon Stores marketplace is meant for a select number of your products that you’re looking to liquidate or promote through a discount,” the FAQ part of the website says. “There are no listing fees, but we do require that products be placed at lower prices than Amazon, eBay, or anywhere else they may be listed online.”

Up to now, Groupon has curated the selection found in Goods by using internal buyers to acquire inventory for sale on Groupon. The vast majority of the items sold up to now through Goods are stored and shipped by Groupon, which is a costly operation that crunches profit margins. Groupon Stores orders, on the other hand, will be fulfilled and shipped by the merchant, not by Groupon. Early products sold through the Stores pilot program are $30 motorcycle goggles and $30 women’s shoes.

“Their focus on the value-oriented buyer and having the best price on the Internet is an interesting approach that fits their brand,” said Scot Wingo, CEO of Channel Advisor, which helps online sellers automate the sales of goods on multiple e-commerce marketplaces. “While we don’t support the new Groupon Stores, we are keeping a close eye on it to see if it gets traction with buyers and merchants.”

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