"The goal is traffic, so you'll see a bunch in" the fourth quarter,
he said. "We proved that we can drive traffic in spades."
For Groupon, there's been a flood of publicity. In an average
week the company adds about 500,000 subscribers. In the week after
the Gap promotion, it added 750,000 subscribers. And then there's
the potential for more offers from national retailers and
manufacturers -- offers that, if the Gap promo is any indication,
will generate a tidy profit for Groupon. Today, for example,
Groupon teamed up with Fandango to offer Fandango customers a $4
movie ticket, if they signed up for Groupon.
The company is growing at a dizzying pace. In the last five
months, it's expanded from one country to 29 countries, from 3
million subscribers to more than 15 million and from less than 300
employees to more than 1,500 employees. The addition of national
brands could boost growth further.
The Gap Groupon, which let users buy a $50 credit for $25 and
was timed to the back-to-school season, sold 441,000 units for more
than $11 million. Mr. Solomon and a spokeswoman for Gap declined to
share specifics of how the deal was structured. However, Mr.
Solomon did say that typically Groupon shares equally in the profit
with its partners. Regardless, it's clear the Gap promotion was a
boon to both companies.
Gap has nearly half a million customers who now have a reason to
go into a Gap store -- the coupon isn't valid online -- and the
expectation is that those customers will spend more than just $50,
likely upward of $75 to $100, Mr. Solomon said. That's $33 million
to $44 million in sales if all of the Groupons are redeemed. Not
all of them will be, of course. But Mr. Solomon maintains that
redemption rates are "north of 80%" for the average Groupon.
"It's a significant chunk of sales. I'm pretty sure if they ran
a national TV campaign, they wouldn't have gotten nearly 500,000
paying buyers in the store," said Mr. Solomon. "It's all about
getting people in the store. When Gap gets people into the store,
they're a fantastic brand, and they merchandise well. I guarantee
80% to 90% of people are buying more [than just $50 worth of
Gap also got points from analysts for experimenting with
Groupon. "These one-day-only deals generally focus on local
products and services, so Gap's involvement is a testament to the
fact that they are thinking outside of the box," wrote retail
analyst Jennifer Black in a research note.
For now, Mr. Solomon said the company expects to end the year
with between 20 million and 25 million subscribers. And it is on
track to generate $400 million in gross sales. That begs the
question: Is Groupon thinking about going public? Mr. Solomon said
"Currently we are focused on growing the company and defining
the category, no IPO plans," he said.