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What's Behind Groupon's (GRPN) Luxury RV Road Trip Promotion?

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Groupon (GRPN - Free Report) recently inked a deal with Hemphill Brothers Coach Company to offer one luxurious road trip in a recreational vehicle (RV) on its marketplace platform.

The RV boasts of amenities like two drivers, Wi-Fi, functional kitchenette, satellite TVs, storage closets, bay storage for kayaks and cycles as well as Xboxes.

Notably, Hemphill Brothers Coach Company is a well-known luxury tour bus service provider catering to the likes of A-List musicians like Cher, Aerosmith, and Justin Timberlake.

 

Groupon, Inc. Price and Consensus

 

Groupon, Inc. Price and Consensus

Groupon, Inc. price-consensus-chart | Groupon, Inc. Quote

 

The road trip will cost $18,500 to the buyer for a one-week round trip from Nashville to Utah and Wyoming’s Grand Teton, Arches, and Yellowstone National Parks. The buyer of this Groupon is eligible to bring along 10 more people on the trip.

Due to the coronavirus outbreak, both domestic and international travel has come to a standstill. Though restrictions on travelling are being gradually lifted, social distancing measures remain in place.

As a result, road trips have become extremely popular among travel enthusiasts. More importantly, RV trips are also becoming popular as these trips eliminate the need to make pit stops for food and lodging. 

Per AAA, people will take 700 million trips in summer in the United States. Of the 700 million trips, 97% trips are expected to be on cars.

Markedly, Groupon’s travel and restaurant offerings have been severely affected by the COVID-19 outbreak and subsequent lockdowns.

For Groupon, this deal will give it a much-needed promotion for boosting high-quality travel booking inventory especially for road and camping trips and attract more users on its platform. Also, by bringing on board reputed partners, Groupon can enhance customer experience and lower purchase friction.

E-commerce Boom Bodes Well

Groupon is witnessing improvement in business owing to restructuring efforts and coronavirus crisis-led e-commerce boom. The company is focusing on higher-margin healthy food offerings and trying to reduce dependence on goods deals.

Furthermore, Groupon is focusing on local experiences marketplace (includes Beauty & Wellness, Things to Do, and Dining). This market is estimated to be more than $1 trillion, per the company’s estimates.

To increase purchase frequency and gross billings, Groupon will have less restrictions on its deeply discounted deals and enable customers to buy such deals more than once. Also, it is planning to introduce new products with lower discounts to improve margins for merchants.

As part of its growth initiatives, Groupon is establishing strategic partnerships with the likes of CoreSource, ParkWhiz, American Express, and Major League Baseball to expand its reach and boost the top line. The company’s collaboration with Grubhub continues to enable customers to order food delivery from Grubhub’s vast network of restaurants via Groupon platform.

Persistent Risks

However, stiff competition is a headwind. Apart from e-commerce companies, these days social media companies are being adopted by merchants to sell their products. Intensifying competition is anticipated to keep Groupon’s pricing under tremendous pressure in the near term.

The transition to high margined local services market is likely to remain an overhang on the company’s near-term performance. Also, lower customer traffic for various categories like restaurants, and travel bookings, owing to the coronavirus pandemic adds to the woes.

Zacks Rank & Other Key Picks

At present, Groupon sports a Zacks Rank #2 (Buy).

A few other top-ranked stocks worth considering in the broader sector are JD.com (JD - Free Report) , Williams-Sonoma (WSM - Free Report) and At Home Group (HOME - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for JD.com, Williams-Sonoma and At Home Group is currently pegged at 46.8%, 6.3%, and 38.8%, respectively.

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