Groupon is laying off 500 employees, or nearly 15% of its global workforce, as the Chicago-based online marketplace looks to cut costs amid falling revenue.
The total includes 293 positions associated with the headquarters at 600 W. Chicago Ave., although many employees work remotely, Groupon spokesman Nick Halliwell said Monday evening.
The company saw a 42% decline in revenue and a loss of $90 million in the second quarter, according to an earnings report on Monday. The weaker-than-expected results prompted Groupon to implement a $150 million cost-cutting strategy that includes “streamlining” its real estate footprint, transitioning to a “self-service” commercial sales platform and downsizing of their technology and sales teams.
Groupon CEO Kedar Deshpande sent a letter to employees on Monday outlining plans to streamline the cost structure, including the “difficult to digest” news of impending layoffs.
“Simply put, our cost structure and our performance are not aligned,” Deshpande said in the employee letter, which was obtained by the Tribune. “In order to position Groupon to successfully execute our turnaround plan, we must reduce our cost structure.”
Groupon had 3,416 employees at the end of the second quarter, including nearly 1,100 at its Chicago headquarters, according to Halliwell. The company had more than 11,000 employees worldwide at its peak in 2012.
In addition to the layoffs and other cost-cutting measures, Groupon is shutting down its Australian merchandise business, which runs on a different platform from the rest of Groupon’s merchandise business, making it “too costly and complex to manage it continuously”. Deshpande said in the letter.
Former Zappos CEO Deshpande joined Groupon in December as the company, hit hard by the pandemic, saw its 2021 annual revenue fall by more than 56% from 2019, according to financial documents.
Once the face of Chicago’s tech startup scene, Groupon has been in decline for much 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. The current market cap is around $415 million.
Launched in 2008, Groupon carved out its own e-commerce niche with deeply discounted daily deals on everything from manicures to meals delivered to subscribers via email. The business model later expanded to include warehousing and shipping products through the Goods platform, which put it in direct competition with online retail giant Amazon.
Since then, the company has transitioned exclusively to a third-party business model and now promotes itself as a local online marketplace where consumers go to shop for services and experiences. Recent deals in the Chicago area include a boat tour on the Chicago River, discount Krispy Kreme donuts in Homewood and a pole dancing class in Aurora.
In the second quarter, Groupon generated global revenue of $153 million, down from $206 million in the same period last year. The company had projected revenue of $670 million to $700 million for 2022, but on Monday withdrew its full-year guidance due to the turnaround strategy and the “uncertain” macroeconomic environment, according to reports from earnings presented to the Securities and Exchange Commission.
Deshpande said in his letter that the “vast majority” of cost-cutting actions will occur this year.
Employees who were leaving were notified Monday, and some were asked to stay on for a period of time to help with the transition, according to the letter. Whenever possible, they’ll be given the option to keep their laptops, use outplacement services, and submit their information to a Groupon talent list for posting on LinkedIn.
Details on the compensation packages were not disclosed.
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