Groupon is laying off 500 employees, or nearly 15% of its global workforce, as the struggling Chicago-based online marketplace seeks to cut costs amid falling revenue.
The total includes 293 positions associated with the headquarters at 600 W. Chicago Ave., though many employees are working remotely, Groupon spokesman Nick Halliwell said Monday night.
The company saw a 42% decline in revenue and a $90 million loss 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 includes “streamlining” its real estate footprint, transitioning to a “self-service” merchant sales platform, and downsizing its stores. technology and sales teams.
Groupon CEO Kedar Deshpande sent a letter to employees on Monday outlining plans to optimize the cost structure, including “hard to digest” news of impending layoffs.
“Simply put, our cost structure and performance are not aligned,” Deshpande said in the employee letter, obtained by the Tribune. “To position Groupon to successfully execute our turnaround plan, we have to lower our cost structure.”
Groupon had 3,416 employees at the end of the second quarter, including nearly 1,100 based in Chicago, according to Halliwell. The company had more than 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 runs on a different platform than the rest of Groupon Goods’ business, making it “too expensive and complex to manage on an ongoing basis.” . Deshpande said in the letter.
Former Zappos CEO Deshpande joined Groupon in December as the pandemic-hit company saw its 2021 annual revenue drop more than 56% from 2019, according to financial filings.
Once the face of Chicago’s tech startup scene, Groupon has been in decline for much of the last decade.
Google tried to buy Groupon for $6 billion in 2010, but investors said there was no deal. By the spring of 2011, Groupon was valued at $25 billion. The current market capitalization is approximately $415 million.
Launched in 2008, Groupon carved out its own e-commerce niche with deeply discounted daily deals on everything from manicures to food delivered to subscribers via email. The business model later expanded to include warehousing and shipping products through the Goods platform, putting it in direct competition with online retail giant Amazon.
The company has since switched exclusively to a third-party business model and now promotes itself as a local online marketplace where consumers go to purchase services and experiences. Recent deals in the Chicago area include a Chicago River boat tour, discounts on Krispy Kreme donuts in Homewood, and a pole dancing class in Aurora.
In the second quarter, Groupon generated global revenue of $153 million, up from $206 million during the same period last year. The company had projected $670 million to $700 million in revenue for 2022, but on Monday withdrew its guidance for the full year due to the recovery strategy and the “uncertain” macroeconomic environment, according to earnings reports filed with the Securities and Exchange Commission. .
Deshpande said in his letter that the “vast majority” of the cost-cutting actions would occur this year.
Leaving employees were notified Monday, and some were asked to stay on for a period of time to help with the transition, according to the letter. Whenever possible, they will be given the option to keep their laptops, take advantage of relocation services and submit their information to a Groupon talent list to be posted on LinkedIn.
Details about the severance packages were not disclosed.