NEW YORK (
Old Navy chain is the latest retailer to partner with Groupon. But is the social shopping site a boon to retailers or a gateway toward commoditizing the industry?
As part of the Old Navy deal, which went live on Groupon just after 12 a.m. Thursday, users can purchase a voucher for $20 worth of summer clothing for just $10.
Gap was the first national brand to partner with Groupon, when it offered a deal in August 2010 for $25 off a $50 purchase in namesake stores. In total, 400,000 of those vouchers were sold totaling $11 million.
There are two ways to look at Groupon's effect on retail. On the one hand, it provides retailers an outlet to rid itself of excess merchandise. Sure, the merchandise is being sold at a discount, but at least it is getting goods out the door.
But Groupon also could be viewed as a major profit-killer, eroding margins and simply serving as a Band-Aid for some bigger issues.
Having a marketing deal with Groupon isn't necessarily something to flaunt, because most of the time it means the retailer needed to heavily discount merchandise to move inventory. Often, it is seen as an act of desperation.
At least for Gap, this seems to be the case, as the specialty retailer reported a 4% decline in May same-store sales, deeper than the 1% drop Wall Street expected, and has been struggling with its sales for several years.
Aside from Gap,
Barnes & Noble
and most recently, privately-held
entered into deals with Groupon.
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