Groupon is laying off 500 employees, or about 15% of its global workforce, as the struggling Chicago-based online marketplace seeks to cut costs amid falling revenue.
Groupon spokesman Nick Halliwell said Monday evening that the total included 293 positions attached to the headquarters at 600 W Chicago Avenue, although many employees are working remotely.
The company reported a 42% drop in revenue and a loss of $90 million during the second quarter, according to an earnings report on Monday. Weaker than expected results prompted Groupon to implement a $150 million cost-cutting strategy that included “rationalizing its real estate footprint”, transitioning to a “self-service” merchant sales platform and the size of its technology and sales teams. includes reducing.
Groupon CEO Kedar Deshpande sent a letter to employees on Monday outlining plans to streamline the cost structure, including “hard to digest” news of impending layoffs.
“Simply put, our cost structure and our performance are not aligned,” Deshpande said in an employee letter obtained by the Tribune. “To position Groupon to successfully execute our turnaround plan, we need to reduce our cost structure.”
According to Halliwell, Groupon had 3,416 employees at the end of the second quarter, including about 1,100 employees from its Chicago headquarters. The company had over 11,000 employees worldwide at its peak in 2012.
In addition to layoffs and other cost-cutting measures, Groupon is closing its Australian goods business, which operates on a different platform than the rest of the Groupon goods business, making it “too expensive to manage on an ongoing basis”. more complicated”. Deshpande has said in the letter.
Deshpande, a former Zappos CEO, joined Groupon in December, as the company, hit hard by the pandemic, saw its 2021 annual revenue decline more than 56% from 2019, according to financial filings.
Once the face of Chicago’s tech startup scene, Groupon has been in steep decline over the past decade.
Google tried to buy Groupon for $6 billion in 2010, but investors said a deal didn’t work out. By the spring of 2011, Groupon was valued at $25 billion. The current market capitalization is around $415 million.
Launched in 2008, Groupon built its e-commerce space with daily deals with huge discounts on everything from manicures to food, wreaking havoc on customers via email. The business model later expanded to include stocking and shipping products through the consignment platform, which put it in direct competition with online retail giant Amazon.
The company has since shifted exclusively to a third-party business model and now promotes itself as an online local marketplace where consumers go to buy services and experiences. Recent Chicago-area offerings include Chicago river boat tours, discounts on Krispy Kreme donuts at Homewood, and pole dancing classes at Aurora.
In the second quarter, Groupon generated global revenue of $153 million, down from $206 million during the same period last year. The company forecast $670 million to $700 million in revenue for 2022, according to an earnings report filed with the Securities and Exchange Commission, but lost its full-year guidance on Monday due to a turnaround strategy and an “uncertain” macroeconomic environment. withdrawn.
Deshpande said in his letter that the “vast majority” of the cost-cutting action will take place this year.
According to the letter, the departing employees were informed on Monday, some of whom were asked to stay for a while to aid in the transition. Where possible, they will be given the option to keep their laptops, take advantage of outplacement services, and submit their information to a Groupon talent list to be posted on LinkedIn.
Details of the severance package were not disclosed.