Contact: Brenon Daly
Sometimes, business models lose a little something in translation. For all of the talk about globalization, commercial homogeneity and so on, we often get reminders that what works in one country may not necessarily flourish in another. That’s particularly true around commerce, as was evident once again in the Q2 results that Groupon announced Wednesday.
First, a bit of history: About a year and a half after its launch in late 2008, Groupon went on an international shopping spree. The heavily funded company picked up about 10 ‘clones’ in locations around the globe, ranging from its massive $126m consolidation of Berlin’s CityDeal, which it paid for with pre-IPO shares, to the tiny tuck-in of Israeli online coupon service Grouper. Other acquisitions got the Chicago company into markets such as Russia, the Philippines, South Africa and beyond.
But so far, Groupon isn’t getting the kind of returns it had hoped for when it started throwing money around the globe. Revenue from business outside of Groupon’s home North American market has actually shrunk so far this year. And it’s not just a slight downtick, but a full 20% decline in sales. Further, international sales are barely breaking even, as investments in ‘rest of world’ (primarily Asia) operations nearly siphon off all of the operating income produced in its EMEA division.
The dramatic slide in international sales contrasts sharply with the 44% growth Groupon posted for revenue in North America. (Add to that the fact that North America business at Groupon is almost half again as large as business outside of its home market.) That disparity stands as a reminder that while the world may be ‘flat’ (as Thomas Friedman and his cohorts have termed it), the business done on it tends to be lumpy.
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