Groupon is laying off 500 employees, or about 15% of its global workforce, as the Chicago-based online marketplace is trying to cut costs amid falling revenues.
It includes 293 positions associated with headquarters at 600 W. Chicago Ave., but many employees work remotely, Groupon spokesperson Nick Halliwell said Monday evening.
The company saw a 42% drop in revenue and a $90 million loss in the second quarter, according to an earnings report released Monday. Weaker-than-expected results prompted Groupon to implement a $150 million cost reduction strategy that included “rationalizing” its real estate footprint, moving to a “self-service” merchandising platform, and reducing the size of its technology and sales teams.
Groupon CEO Kedar Deshpande sent a letter to employees on Monday outlining his plans to streamline the cost structure, including “hard to digest” news about the upcoming layoffs.
“Simply put, our cost structure and performance are not aligned,” Deshpande said in the employee letter obtained by the Tribune. “We need to lower our cost structure to position Groupon to successfully implement our turnaround plan.”
According to Halliwell, Groupon had 3,416 employees at the end of the second quarter, of which approximately 1,100 were out of Chicago headquarters. The company had more than 11,000 employees worldwide in 2012.
In addition to layoffs and other cost-cutting measures, Groupon is shutting down its Australian Products business, which operates on a different platform from the rest of the Groupon Goods business, making it “too costly and complex to consistently manage”. Deshpande said in the letter.
Deshpande, the former CEO of Zappos, joined Groupon in December as the company, which was hit hard by the pandemic, saw its 2021 annual revenue drop more than 56% from 2019, according to financial filings.
Once the face of Chicago’s tech startup scene, Groupon has been in decline for most of the past decade.
Google tried to buy Groupon for $6 billion in 2010, but investors said there was no deal. In the spring of 2011, Groupon was valued at $25 billion. Its current market capitalization is approximately $415 million.
Launched in 2008, Groupon created its own e-commerce niche with heavily discounted daily deals on everything from manicures to meals, and distributed to subscribers via email. Later, the business model expanded to include stocking and shipping products through the Merchandise platform, which puts products in direct competition with online retail giant Amazon.
The company has since transitioned to a third-party-only business model and now promotes itself as an online local marketplace where consumers buy services and experiences. Recent Chicago area offerings include a Chicago River boat tour, discounts on Krispy Kreme donuts at Homewood, and a pole dance class at Aurora.
In the second quarter, Groupon reduced global revenue to $153 million from $206 million in the same period last year. The company had projected revenue of $670 million to $700 million for 2022, but withdrew its full-year guidance on Monday due to its turnaround strategy and the “uncertain” macroeconomic environment, according to earnings reports submitted to the Securities and Exchange Commission.
Deshpande said in his letter that “the vast majority” of cost-cutting actions will take place this year.
According to the letter, employees leaving were notified on Monday and some were asked to stay for a while to help with the transition. Where available, they will be offered the option to keep their laptop, take advantage of relocation services, and submit their information to a Groupon talent list for publication on LinkedIn.
Details on severance pay packages were not disclosed.
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