Chicago-based Groupon today laid off more than 500 of its employees — 15% of its 3,416-person headcount — according to posts from former employees on social media. The reduction impacted workers in teams including merchant development, sales, recruiting, engineering, product and marketing.
Groupon confirmed the layoffs to TechCrunch after the publication of the story.
“Our overall business performance is not at the levels we anticipated and we are taking decisive actions to improve our trajectory,” CEO Kedar Deshpande said in a statement provided to TechCrunch. The chief executive says that the layoffs, as well as a reinvestment in marketing and initiatives that drive customer purchase frequency, will set the company up to generate positive cash flow by the end of 2022.
In a letter to staff, Deshpande said that Groupon is reducing its North America sales teams to focus on “self-service merchant acquisition capabilities.” It is also re-organizing the company to focus “only on mission-critical activities and leaning on more external support.” “In addition, we are proposing to reduce cloud infrastructure and support functions as we wrap up cloud migrations.” Groupon is also closing its Australia Goods business, more than a decade after launching there in the first place. Finally, Groupon said that it will “rationalize” its real estate footprint to be more in line with hybrid work.
Coupon-finding Groupon has grown to have steep e-commerce competition since its founding in 2011. Rakuten and Honey, which sit on consumers’ browsers to scour the internet to show related deals, have grown into massive companies. All the platforms make money from affiliate fees and revenue-share partnerships, meaning the more competitors, the bigger the fight for customer acquisition. A spokesperson from Groupon said that it does not view Rakuten and Honey as competitors because the companies are more focused on physical products, while Groupon is focused on experiences and services.
Still, e-commerce tailwinds have changed as consumer spending changes in reaction to the market downturn. It’s a hard time to be a growth-stage startup.
Over the past few years, the number of Groupon shoppers has fallen sharply. According to Statista, 22.2 million visitors to the company’s site purchased at least one offer in Q1 2022, down from nearly 54 million in Q4 2014.
The layoffs, while substantial, aren’t as large as the cuts Groupon made to its workforce in 2020. In April of that year, Groupon said it would lay off or furlough 2,800 employees as business “deteriorated” from the COVID-19 pandemic. Following the restructuring, Groupon phased down its goods category as it shifted to a third-party marketplace model, which had merchants assume responsibility for fulfillment and returns.
According to its jobs page, Groupon has openings for 67 roles in teams across account management, engineering, software development and more. The company is trading at $13.89 at time of publication, down 67% from its 52-week high of $41.66.
It’s likely no coincidence that the layoffs arrived ahead of the release of Groupon’s Q2 2022 financial results this afternoon. Revenue was $153.2 million in the second quarter 2022, down 42% compared with the prior year, on just 21.1 million customers making one or more purchases within the last 12 months. The company blamed the transition of its goods business to a marketplace model as well as a “decline in engagement” on the platform.
Below is the entire memo that Groupon says Deshpande sent to staff this morning:
Team,
I’m writing to you with some tough news. Later today, we will publicly be announcing a plan to streamline our cost structure, which will include our proposal to remove approximately 500 positions globally. While we have discussed the need to streamline our organization as part of our strategy to transform Groupon into the destination for Local experiences and services, I recognize that saying goodbye to colleagues will hit us all harder than any words on a piece of paper ever can.
We’ve done an intensive analysis of our organization and business structure, and the actions we are announcing today were not undertaken lightly. The impact will be felt primarily across our Technology organization, North America Sales and our Australian Goods business.
Today’s news will be difficult to digest no matter how it’s presented, but I want to share as much as I can about why we are taking these actions.
Put simply, our cost structure and our performance are not aligned. In order to position Groupon to successfully execute our turnaround plan, we have to lower our cost structure. Over the last three months the senior leadership team has been challenging our current processes and automating how we work, both with an eye toward taking costs out of the business and improving our productivity. As a result, we are announcing the following actions to:
- Reduce our North America sales team and continue to scale our self-service merchant acquisition capabilities. As we transition to a self-service led sales organization, we expect to be able to onboard and manage inventory and continue to drive efficiencies for our merchant partners.
- Put forward a proposal to re-organise and align the size of our tech organization to our business needs, by focusing our resources only on mission-critical activities and leaning more on external support. As part of this work, we will also be exploring opportunities to leverage engineering centers of excellence to increase efficiency and productivity. In addition, we are proposing to reduce cloud infrastructure and support functions as we wrap up cloud migrations.
- Close our Australia Goods business, which runs on a different platform than the rest of the Goods business making it too costly and complex to manage on an ongoing basis.
- Rationalize our real estate footprint to reflect the needs of our new hybrid work model.
The vast majority of these cost actions would happen this year. Going forward, we’ll continue to look at ways to optimize, like leaning into automation and streamlining our tech platform, two areas we’ve made significant progress in over the last three months as teammates stepped up and challenged our current processes. We will also continue to review our cost structure in other areas and ensure it’s aligned with the size of our current business, while still giving us room to grow.
To those impacted by today’s news
For those of you whose roles are impacted today, we’re sincerely grateful for all of the contributions that you have made and want to do our best to support your success in the next steps of your career. For certain employees in International, you will be notified of our proposed changes and will enter into a consultation phase over the coming days and weeks.
Where possible, we will be giving departing employees the option to keep their laptops, offer outplacement services as an additional resource, and where legally permitted, provide the opportunity to submit their information into a Groupon Talent List that we will be sharing on LinkedIn. We will be notifying affected employees directly throughout the day today, some we are asking to stay on for a period of time to assist with the transition. All impacted employees will receive information from HR regarding severance and other details on benefits to support you over the next weeks and months.
Looking Ahead
I joined Groupon because I truly believe that our marketplace is special: a place that helps people create core memories and forge new connections that can last a lifetime. Today, my conviction that the Groupon marketplace can become the destination for local experiences and services is as strong as ever. We are well positioned to transform our company and we are laying the foundation for growth. Together, we can create a fundamentally better experience for our customers and merchants.
We’ll continue to discuss today’s actions and our transformation in the coming days: as a reminder we’ll be hosting a Global All Hands meeting this Wednesday at 9:30am CT / 3:30pm BST / 4:30pm CEST to answer any questions, which you can submit in advance via this form. In addition, your STeam leaders will also be bringing their orgs together to host short, informal town halls over the next few days.
Thank you for your continued commitment to Groupon.
Kedar Deshpande
CEO
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