As consumers step up their spending on travel and on local experiences, Groupon noted, they are pulling back on buying products.
The eCommerce marketplace shared in an investor presentation accompanying its first-quarter 2024 financial results Thursday (May 9) that, with the exception of its “Goods” business — which sells retail products — its North American segment, which accounts for the bulk of the business, saw +8% year-over-year growth. Conversely, gross billings from goods were down 36% year over year.
“Our current Goods business is struggling, and we don’t see any near-term change in the negative trend,” Groupon CFO Jiri Ponrt told analysts on a call. “At 4% of first quarter revenues and declining rapidly, Goods is becoming a smaller and smaller part of our business.”
Indeed, consumers are pulling back on buying products. The February/March PYMNTS Intelligence report, “New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck,” finds that 56% of high-income, 66% of middle-income and 69% of low-income shoppers said they have cut down on nonessential spending in the last year due to retail product price increases.
Conversely, gross billings for local experiences in North America were up 4%, and travel gross billings were up 3%.
As the company reprioritizes experiences, it is doing so led by Dusan Senkypl. On Tuesday (May 7), Groupon announced the installment of Senkypl, who was serving as interim CEO and who is co-founder and partner of the company’s largest shareholder, Pale Fire Capital, as permanent CEO.
“I see a massive opportunity for Groupon to become the ultimate destination for local experiences and services. If you want my motivation for taking this role — the work is not done,” Senkypl said in a statement at the time. “… A year ago, our business was declining. Fast forward to our recently updated first quarter outlook, we can see that our topline is stabilizing, and we have four quarters in a row of positive Adjusted EBITDA. Our business is back on its feet, but not yet firing on all cylinders.”
Indeed, many consumers continue to spring for meaningful experiences. For instance, online ticket resale marketplace Vivid Seats reported Tuesday (May 7) that it saw marketplace gross order value (GOV) of more than $1 billion in the first quarter of the year, rising 20% year over year, with revenue increasing by 18%.
Plus, there is a generational trend toward spending on experiences. The April installment of the New Reality Check series, “Why 60% of Gen Z’s Live Paycheck to Paycheck,” found that the younger a consumer is, the more of their income they are likely to allocate toward spending on recreation, leisure and entertainment activities.
Looking ahead, Groupon is looking to digital innovations to improve consumers’ experience with the platform, cracking down on fraud, improving search capabilities and leveraging artificial intelligence (AI) to boost high-quality offers.
“We have taken action to remove low quality deals from our inventory and progress on an initiative to help quality merchants curate their deals,” Senkypl said. “We are using AI to identify merchants’ unique selling points and then significantly enhance deal content, including imagery and in the future video, to capitalize on what sets these merchants apart and drive demand to their deals.”