How Did Groupon’s Gross Billings & Gross Profit Per Customer Vary Across Regions in 2016?

by Trefis Team
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Groupon (NASDAQ:GRPN) reported solid financial results in the last three quarters of 2016, improving shareholder sentiment regarding chances of a turnaround in the company’s fortunes. Groupon’s stock price is up over 13% in the last year.

In 2016, both the company’s gross billings and gross profits grew year-over-year (y-o-y) in North America and declined in international markets, owing to its strategy to focus on the North American market and move away from certain low-margin goods businesses. However, both Groupon’s gross billings per active customer and gross profit per active customer declined in the same period. Interestingly, the company’s gross profit per gross billings improved in full year 2016. In this note, we focus on how these metrics trended over the last eight quarters and their implications for Groupon.
Gross Billings Per Customer

grpn-49In 2016, the number of active customers grew by 20% y-o-y in North America while they declined by about 20% in the Rest of World segment. The number of active customers currently stand at 52.7 million, including over 31 million in North America. Groupon’s gross billings per average active customer declined from $34.90 in Q4 2015 to $32.20 in Q4 2016. In terms of geographical spread, this metric declined in double-digits y-o-y in North America and EMEA but improved in the Rest of World region.grpn-50

The increased marketing efforts and order discounts had more of an impact on Groupon’s customer base than gross billings, leading to a decline in gross billings per customer last year. However, a positive trend witnessed in this period was that even though the active customer growth rate accelerated quarter over quarter in 2016 (in North America and globally), the decline in gross billings per customer remained between 5% and 7.7%.

Gross Profit Per Customer


Following a trend similar to gross billings per average active customer, Groupon’s gross profit per average active customer declined from $7.60 in Q4 2015 to $7.00 in Q4 2016. In terms of geographical spread, this metric declined in mid single digits y-o-y in North America and EMEA but increased in the Rest of World region.  grpn-52

The impact of increased marketing efforts helped improve Groupon’s customer base as well as gross profits in North America, though its gross profit per customer did decline somewhat in 2016. It will be interesting to see how this metric trends over the next few quarters. We expect the company to continue with its marketing efforts in this quarter to expand its active customer base, which is likely to provide benefits in the form of higher gross billings, gross profit and revenue in 2017.

Gross Profit Per Gross Billings

In North America, Groupon’s gross profit per gross billings improved in the first two quarters y-o-y but declined in the third quarter before improving drastically in Q4. This helped maintain the company’s overall gross profit per gross billings around 22% levels over the last few quarters in line with the improvement in its take rate (revenues per gross billings). This came despite the decline in Groupon’s overall gross margin (gross profit/revenues) in 2016, which of course can be attributed to the drastic improvement in take rate in the international markets last year.


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