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Groupon Gets Physical with E-Commerce, Not Just Coupons

Groupon (GRPN) stock just keeps moving higher, with GRPN shares up over 110% year-to-date in 2013 — in part thanks to a new CEO at the helm.

But investors may not know that a big reason GRPN stock continues to climb isn’t just its popular online coupon service or a management shakeup after founder and failed CEO Andrew Mason went off the reservation.

One Groupon segment that has been particularly important to earnings lately has been the “Goods” business.

groupon goods grpnGroupon appears to be chasing a direct-selling model known as Groupon Goods to drive revenue. In fact, it was growth in this segment that helped Groupon earnings meet expectations in May and most recently the Goods segment contributed 31% of gross billings — up from 23% in the year prior.

Of course, breaking into e-commerce — particularly discounted e-commerce where margins are painfully low — is no easy task. Amazon (AMZN), eBay (EBAY) and other e-tailers certainly won’t cede ground without a fight.

Furthermore, Groupon stock hardly has good will with investors; GRPN has had a rough ride since its 2011 IPO, including an accounting scandal, a decline that’s sliced the stock to around half its IPO price despite recent strength, tough competition in the deals space from LivingSocial and RetailMeNot (SALE) and even big players like Google (GOOG) elbowing into the space.

But Groupon Goods holds promise as the company pushes forward with a new CEO and looks beyond coupons. In fact, The Wall Street Journal reports that GRPN is pursuing a warehouse network akin to Amazon in order to fulfill this fast-growing part of its business.

It’s anybody’s guess where Groupon goes from here and how competitors react. But at least GRPN is thinking differently — something that Wall Street is right to be excited about after a tumultuous 2012 for Groupon stock.

Related Reading on Groupon Goods:

Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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