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Groupon: Upcoming Player in the Food Delivery Services Market


Oct. 19 2015, Updated 9:07 a.m. ET

Food delivery services industry

Like Amazon (AMZN), Groupon (GRPN) is another player that recently forayed into the food delivery services market. In August 2015, Groupon launched a new program called Groupon to Go. The service will launch in Chicago, offering food-delivery deals that allow customers to save up to 10% on every order.

In addition to introducing this program, Groupon acquired OrderUp, a Baltimore-based delivery service startup that operates in multiple cities. Groupon’s main objective is to leverage the $70 billion delivery industry by expanding its service in various US cities.

According to the above graph and a report from Zacks Investment Research, with the exception of 4Q14, Groupon’s adjusted earnings per share have declined in the last two quarters of fiscal 2015.

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Groupon’s success

Since its launch in 2008, Groupon has seen immense growth in its visibility in multiple cities and its user base. In 2011, Forbes listed Groupon as the fastest-growing company. The same year, Groupon filed for a $750 million IPO after turning down a $6 billion offer from Google (GOOG) to acquire it. However, after its 2011 IPO, Groupon began to report losses each quarter, resulting in a 42% fall in its share price.

Groupon has faced tremendous competition from e-commerce giants such as eBay (EBAY) and Amazon (AMZN), which are becoming the first choice of merchants due to the lucrative services being offered. For example, eBay Deals has been a highly successful service, offering benefits to customers such as convenient ordering, free shipping, and low prices.

For diversified exposure to eBay, investors can consider the SPDR S&P 500 ETF (SPY), which invests in the 500 largest companies in the US. The technology sector accounts for 18% of the fund’s portfolio.


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