Groupon Launches National Deal With Gap, Selling 10 Groupons A Second

What a difference a day and a deal makes. Yesterday 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.  

Despite the technical difficulties, according to Groupon‘s CEO Andrew Mason, as of 11AM PST (the e-mail blast went out at roughly 6AM in each time zone) Groupon has sold 200,000 Groupons and is currently selling roughly 10 per second. Ten sales per second is an unusually high volume, Mason says, “several multiples above the average.”

Originally Groupon predicted they would sell more than 700,000 Gap Groupons by the end of day. Or, roughly $17.5 million in revenues for the daily deal machine. As it turned out sales tapered off and 400,000 were sold or $11 million in revenues — not too bad.

Although Groupon has dabbled in multi-city deals, this is the first time they have partnered with a national retailer for a full countrywide roll out. Interesting to see how Groupon will integrate this into its mainstream which are local daily deals, but the Gap promo certainly proves that a  national campaign could be compatible with Groupon’s business model. For Groupon, it’s an obvious win situation, the Gap deal enhances the company’s mainstream appeal, its consumer visibility and, as evidenced by the numbers, it also pulls in a lot of cash.

The upside for Gap is a little less clear. 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?).  

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~ by sjfrenda on August 21, 2010.

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