Groupon Sold 441,000 Deals With Gap, May Have Pocketed $5.5 Million

Groupon_4COverwhelmed by the response, Groupon‘s servers faltered, but never failed yesterday as bargain hunters clamored to pay $25 for $50 worth of merchandise at national retailer Gap. Julie Mossler, Groupon’s Consumer Marketing Manager, told Social Times that 441,000 deals were sold. If Groupon splits the revenue with Gap – as analysts speculate is their standard take, but Groupon would neither confirm or deny – Groupon may pocket $5.5 million.

According to Mossler, Groupon ramped up with five times its server capacity and needed to rely on its fallback plan when that proved insufficient. Difficulty accessing the deal was limited to the few hours after the e-mail announcing the deal was opened across the country. Customers were directed to a page asking them to submit their e-mail address and all were later contacted when server access was available. Mossler told us that Groupon was proud that deal seekers did not land on a typical “come back later” page.

This deal was the first time Groupon offered a deal concurrently in all of its cities from a single company. Gap, along with much of the retail sector, is suffering from declining same store sales and promotion is timed, it appears, to jumpstart the Gap’s back-to-school shopping season. Coupons that offer such a large discount usually rely on customers buying more than the value of the coupon to be profitable.

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Gap – and it’s other brands, such as Old Navy and Banana Republic – frequently offer its regular customers time-limited discounts ranging from 10% to 30%. What’s different here is that the cost of deployment has been handed off mostly to a third-party at an apparently high price. However, if one accounts for the costs of designing, printing, mailing, in-store collateral and managing a standard coupon campaign, this collaboration with Groupon may not cost the Gap significantly more. In addition, the deals are prepaid and some percentage may not be used. Groupon does not report “breakage” rates, telling us the majority of offers are redeemed.

In additional to being its first truly national offer, this deal differs for Groupon is another significant way. Gap is, even with sluggish sales, a powerful brand. Most of the local deals are for retailers and services that are trying to make themselves better known in their respective communities. Whether the success of the combination of a high-visibility brand with a single-day national push can be replicated may well rely on positive (or even neutral) conversation about the deal in social media between now and, let’s say, a month after it expires. When asked if something like the Gap offer would be repeated, Groupon’s Mossler responded, “It’s up to our customers.”

To be more than a flash in the pan, Gap needs to convert those who redeem the deal into recurring customers. We would appreciate hearing from those who use the deal, letting us know if their Gap purchasing experiences are any different from their previous visits to the store.

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In addition to blasting information on the deal out to those who subscribe to Groupon’s daily email and social media streams, the deal was tweeted on Twitter’s @earlybird as well as to Gap’s Twitter followers. There do not appear to be any changes to Gap’s Twitter or Facebook presence – both of which are rather ordinary. This could be a lost opportunity for the company to ride the back of the current buzz.

When asked for comment, Gap provided us with this statement. “We know our customers are online and it’s important to connect with them where they are spending their time. We’re experimenting with Groupon as one our many traffic driving initiatives because it offers a fun and unique way to engage with our target customer, reaching more than 8 million people everyday.”

Groupon’s largest previous deal was purchased by 19,000 in the Chicago market for an architectural boat tour.

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