Online deals provider Groupon Inc. (GRPN) recently announced that it has acquired Salt Lake City based online retail manager CommerceInterface. However, the company did not disclose the financial details of the transaction.
Founded in 2007, CommerceInterface’s channel management technology helps in aggregating goods from multiple vendors on an e-commerce platform. Since April 2012, Groupon has been using the technology for its Groupon Goods platform, through which merchants post sales of different items that include diamond jewellery, designer sun glasses, mattresses, computers and many more.
The acquisition of CommerceInterface is expected to better Groupon’s existing domestic e-commerce service going forward. However, for 2013, we believe that the primary focus will be on expanding the Groupon Goods platform in international markets. At the end of the third quarter of 2012, Groupon Goods reached an annual run rate of approximately $1.5 billion in global billings.
The company also announced that post CommerceInterface acquisition, its technology will be solely used by Groupon. Currently, CommerceInterface serves a number of other merchants who post their sales on different e-commerce websites such as eBay Inc. (EBAY) and Amazon.com Inc. (AMZN).
Groupon is offering migration support to CommerceInterface’s current customers, who will have the option to shift to other vendors over the next six months. We believe that the exclusivity of CommerceInterface technology will provide competitive advantage to Groupon over its peers going forward.
Groupon has been on an acquisition spree over the last 12 months. The company has acquired a number of start-ups such as Breadcrumb, Uptake, Hyperpublic, Adku, and FeeFighters. These acquisitions are expected to boost Groupon’s position in the small and medium-size business (SMB) market, apart from expanding its technology and product portfolio.
We believe that Groupon is well positioned to gain from rising e-commerce spending on mobile devices, a profitable domestic market and an under-penetrated international market. We expect these opportunities to continue to drive top-line growth going forward.
Groupon enjoys a first-mover advantage in the daily deals market based on its well-recognized discount coupons. However, we believe that the market is getting more competitive due to the growing interest from technology stalwarts such as Amazon and Google Inc. (GOOG).
Moreover, we believe that Groupon needs to post profits consistently for the next couple of quarters to gain the confidence of its jittery investors. Until that happens, we prefer to remain Neutral on the stock over the long term.
Currently, Groupon has a Zacks #3 Rank (Hold).
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