Seeking Alpha

Groupon looking to buy warehouses, take on Amazon

  • CEO Eric Lefkofsky says Groupon (GRPN) is looking to buy at least 3 warehouses to support its direct e-commerce sales/fulfillment efforts. A Kentucky facility has already been singled out for acquisition.
  • Groupon's e-commerce sales have been taking off. Revenue for Groupon's Goods e-commerce platform jumped 69% Y/Y in Q2 to $241.8M, accounting for 40% of revenue and helping offset slumping daily deals sales. Moreover, Groupon's direct revenue (inc. a large chunk of Goods sales) rose 190% Y/Y to $190M.
  • However, this growth has pressured Groupon's gross margin. Lefkofsky argues creating warehouses and bringing shipping/fulfillment in-house will improve margins.
  • Last December, Groupon bought CommerceInterface, a provider of channel management software for retailers, manufacturers, and distributors, to improve Goods' order execution.
  • By creating a fulfillment infrastructure, Groupon is looking to mount a challenge to Amazon (AMZN), which has been building warehouses left and right, and now derives 40% of its unit sales from 3rd-party merchants.
Comments (3)
  • Michael428
    , contributor
    Comments (702) | Send Message
    As Paulo says "no moat" or the economic term "little barriers of entry".


    The margins can go nowhere but down.
    28 Aug 2013, 08:43 AM Reply Like
    , contributor
    Comments (4) | Send Message
    Amazon has over 50+ warehouse and fulfillment centers. To think Groupon at this point can attempt to develop any scale would require tremendous amounts of capex that would be a serious drag on earnings and cash
    28 Aug 2013, 09:36 AM Reply Like
  • BigJ1260
    , contributor
    Comments (200) | Send Message
    Which means GRPN stock should go parabolic based on Amazon price doing nothing but go up as they lose more and more money while margins continually decline
    28 Aug 2013, 03:14 PM Reply Like
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