Groupon, Inc. GRPN recently unveiled its plans to enter the food delivery business. The company has launched Groupon To Go. This news came shortly after the company’s acquisition of the OrderUp food-delivery service on Jul 16.
The company had started a pilot program in Mar 2015 with as many as 500 restaurants in Chicago. Groupon To Go has presently tied up with eateries like Quiznos, Popeyes, Subway and Papa John's International PZZA. Additionally, restaurants like Ditka’s Restaurant, Al's Beef, Adobo Grill, BIG & little’s, Freshii, Rosati’s Pizza, Star of Siam and Wishbone are also partnering with the company for takeouts and deliveries.
Groupon intends to expand the service to other key cities this year. In fact, the company expects to start the service in Austin and Boston this fall.
Going forward, the service is likely to include real-time order tracking, group ordering and even pre-ordering for a different date and time. Meanwhile, OrderUp will continue to provide delivery and takeout services in midsize markets for Groupon. The latter also plans to leverage OrderUp’s technology and operations platform in the future to collaborate with eateries which do not offer online delivery services.
Groupon intends to get a foothold in the market that has already been penetrated by the likes of GrubHub GRUB, Postmates, DoorDash, Caviar, Munchery, Sprig, Maple, Blue Apron, Plated, Uber (which is expanding its UberEATS) and Yelp’s YELP Eat24. Groupon is giving customers a 10% instant cash back offer for a few top-notch eateries. This should place the company favorably. According to market reports, food delivery companies charge a 20%–30% premium for their services.
Additionally, Groupon is collaborating with Mike Ditka, Hall of Fame player and head coach of the Chicago Bears. Groupon users will have a chance to win Groupon To Go office party, which would come with tailgate games and food delivered by Ditka himself.
Groupon has already placed itself well in the daily discount deals. Through its Local Deals, the company acts as a third-party marketing agent and sells vouchers known as Groupons, which users can redeem against products or services at merchant locations. Due to this, the company is already working with a number of restaurants and has also built itself a robust consumer base.
We believe that Groupon To Go service can prove to be of significance for the company as it can act as a bridge to bring its customers to the eateries and open a whole new space for the company’s growth. However, even though the takeout and deliveries market is expected to enjoy robust growth, competition is also rife with a number of investment-heavy startups eyeing the market.
This Zacks Rank #2 (Buy) company is set to report second-quarter 2015 results on Aug 7.
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