Groupon lays off 1100, pulls out of 6 countries

Groupon - the pioneer of what was once hailed as a revolution for local commerce - is now struggling. Photo / Getty

In the latest sign of the decline of "daily deal" sites, Groupon said yesterday that it is laying off 1100 people worldwide, or nearly 10 per cent of its workforce, and closing operations in six countries.

Groupon is pulling out of Morocco, Panama, The Philippines, Taiwan, Thailand and Uruguay as well as Puerto Rico, according to a blog post from the company. "We saw that the investment required to bring our technology, tools and marketplace to every one of our 40(plus)+ countries isn't commensurate with the return at this point," wrote chief operating officer Rich Williams.

The company also recently pulled out of Greece and Turkey and sold a controlling stake of its India unit to venture capital firm Sequoia.

The job cuts will come primarily from the international team that helped put together deals and customer service, according to the blog post. And the restructuring will cost the company. It expects to pay a pre-tax charge of $35 million, which will cover employee severance and compensation costs as well as other costs, according a statement filed with the Securities and Exchange Commission.

The company's stock fell 2.5 per cent in morning trading on Tuesday (US time) to about US$4 a share. But its stock has lost half its value so far this year.

Groupon was once at the forefront of sites hailed as a revolution for local commerce: They offered subscribers heavy discounts at businesses and typically took a cut of the deals sold. At first, businesses flocked to them and a crowd of similar services cropped up.

But then some businesses, especially restaurants, began complaining that offering deals through Groupon ended up costing them money. Regular customers would show up with coupons in hand. New customers spent the bare minimum and didn't turn into repeat business.

Customers, too, seemed fatigued by the sheer volume of emails from the daily deal industry. Services aimed at helping people unsubscribe from them even popped up.

The industry has struggled to address customer fatigue and revive its fortunes. In 2013, Groupon fired founder and chief executive Andrew Mason. LivingSocial, a D.C.-based competitor, has also shed employees as part of attempts to restructure.