Hoping to solidify connections with its network of merchants and retailers, Groupon (Nasdaq: GRPN) introduced a new point-of-sale feature on Tuesday known as “Breadcrumb.”
As the cornerstone of traditional physical retail stores like supermarkets and restaurants, requiring customers to pay merchants via cash or credit before they leave the store itself, Groupon’s entrance in the point-of-sale business was widely anticipated: The Chicago-based e-commerce company had acquired New York-based start-up Breadcrumb in May. As Groupon has continued to struggle in the stock market alongside several other prominent, newly-public tech companies like Facebook (Nasdaq: FB) and Zynga (Nasdaq: ZNGA), industry analysts and investors alike began to wonder how it could establish stronger revenue streams than its local deals had been able to in the company's short history.
Groupon's new "Breadcrumb" service unveiled today mirrors the site’s introduction of Groupon Payments less than a month ago, another service that enables merchants to accept merchants to accept credit card payments from users through their iPhones or iPod touches. Breadcrumb adds the iPad to the list of supported mobile devices that can now process payments, as the tablet is already an extremely popular POS system for restaurants and small businesses. Together, Groupon's two new features hope to become streamlined by eliminating any technical or psychological barriers consumers face on the e-commerce platform.
The added benefit Groupon hopes to sell to merchants with both Breadcrumb and Groupon Payments is the chance to cut overhead costs incurred by older payment systems. By establishing a consistent platform for merchants, Groupon then hopes to lock stores and restaurants into the service and eventually begin introducing the brand’s coupons to potential customers through the merchants themselves.
"As someone who worked in the hospitality industry, I grew tired of paying tens of thousands of dollars for overly complex and unreliable POS systems that were difficult to use" said Seth Harris, General Manager of Breadcrumb, in a statement. "The Breadcrumb team used our knowledge of the restaurant and bar business to develop an exceptional restaurant POS system backed by a first-rate support team, all at one of the lowest prices in today's marketplace."
“We are not focused on these businesses boosting the bottom line; they don’t need to be wildly profitable on their own,” said Groupon CEO Andrew Mason, in an interview with CNBC about Groupon Payments. “What we are really focused on is using additional services to strengthen the value proposition that we have for our merchants.”
Since Groupon is not hoping to eke out a profit from Breadcrumb alone, the company also has an added advantage of being able to offer the software at a low price in order to draw in more restaurants and merchants from the outset. One terminal will cost $99 a month, while 10 terminals only bump up the price to $399. Of course stores will have to supply their iPads, cash storage, receipt printers, and Internet access, but Groupon is hoping to convince stores that entering its ecosystem earlier will save them more money in overhead costs in the long run.
The struggling tech company is thus aiming to enter the increasingly crowded mobile payments marketplace by attacking both ends of the problem simultaneously—offering general consumers daily deals and extra incentives while offering retailers the promise of a digital payment platform with a pre-existing user base. What Groupon hopes to get in return is a wider user base that remains loyal to particular merchants, rather than taking advantage of specific deals but never coming back after using a coupon, a problem that cost the e-commerce platform many of its early customers once merchants realized their investment failed to acquire any meaningful user retention.
“The goal had always been thousands of customers,” Harris added in a Breadcrumb blog post. “That’s what I told every new hire. We won’t rest until there are thousands of restaurants, bars, nightclubs and cafes using Breadcrumb to operate their venues. About four months ago, our goal changed when we joined forces with Groupon: now we won’t rest until there are tens of thousands of restaurants, bars, nightclubs and cafes using Breadcrumb around the world.”
Despite the new announcement, Groupon shares dropped sharply after a brief jump in early morning trading Wednesday, falling to $5.02 in early afternoon trading.