How Groupon Could Help Alibaba Penetrate the US Market



5.6% stake in Groupon

Alibaba (BABA) is making all attempts to reach the US market to better understand consumers and merchants. Towards that end, in February 2016, Alibaba announced it would buy 33 million shares of Groupon (GRPN). With a 5.6% stake, Alibaba will become the fourth-largest investor in the company. Groupon has lost around 86% of its value since its IPO. However, the market reaction was positive about the announcement, which drove Groupon’s stock up by 29%.

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Strategic investment

The purchase of Groupon’s shares could be a strategic investment for Alibaba. In a prior article, we discussed Alibaba’s joint venture, Koubei, which primarily works on an O2O (online-to-offline) platform to connect merchants with consumers. Similarly, Groupon follows the same O2O model to offer discounted coupons to consumers based on its affiliated merchants.

Alibaba can leverage Groupon to understand the business dynamics and strategies followed in the US market, which it wants to penetrate for further expansion. The company has also invested in US companies such as online retailers Jet.com, augmented-reality provider Magic Leap, and ride-hailing service Lyft in the past.

“We bought a very small minority stake in Groupon in order to share ideas between US and China markets in a space…This is a passive holding, and if Groupon management would like to exchange experiences with us, we are prepared to share,” said Robert Christie, vice president of Alibaba’s international media relations.

Amazon (AMZN) and Google (GOOG) constitute 9.1% and 8.7% of the PowerShares NASDAQ Internet Portfolio (PNQI), respectively.


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