Source: TechCrunch, Aug 2010
This morning, Groupon launched its first nationwide deal, $25 off a $50 purchase at Gap. The promotion, which was available in every city, briefly crashed Groupon’s servers as deal-happy consumers clicked on the 50% discount and pinged their friends.
In total, 400,000 Groupons were sold, or $11 million in revenues. Not quite the 700,000, but certainly not shabby.
The upside for Gap is a little less cut and dry. Yes, it’s a splashy marketing campaign coupled with the opportunity to push out inventory, but $25 off $50 is a deep cut to margins— especially, when you consider that Groupon typically takes a 50% cut. Thus, from Gap’s perspective, the retailer is effectively dolling out 75% off discounts on sale and non-sale items. That raises a red flag. Did Gap pair up with Groupon to launch a sexy marketing campaign or did they partner with Groupon because they really
need to drum up excitement and sales (whatever the margin?).