Why Groupon Shuts Its South African Operation

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Online discount coupon organization Groupon has shut its South African operation.

Customers trying to access the website on Friday morning were greeted with an apology: “We are sorry to inform you that as of November 4 2016 Groupon has wound down its operations in South Africa and we are unable to offer you any deals today.”

Groupon in SA offered discounts on goods‚ as well as on experiences such as restaurants‚ getaways and adventure activities.

It said on its website that vouchers bought before November 4 would remain valid until their expiry dates‚ but Groupon was offering customers who were “not comfortable with using their voucher” the option of returning it for cash‚ until November 30.

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“Goods purchased up to November 4 will be fulfilled. Should you need to return [an item] you purchased‚ please do such before November 30‚” the website said.

The US parent company recently announced a merger with rival LivingSocial. It has also been closing operations in other countries‚ to reduce its international footprint to 15 countries from 27.

It posted a $35.8m net loss in the third quarter but said the North American operation was strong‚ with double-digit growth in gross billings and what CEO Rich Williams said was its “highest quarter for customer acquisition in over three years”.

Unit sales in North America rose 4%‚ while those in the Europe‚ Middle East and Africa region fell 8%‚ and in the rest of the world the decline was 31%.

Groupon’s US share price is trading at just below $4 — from a price of $28 when it listed in 2011 — and it recently announced retrenchments.

The business model has drawn criticism. Its aim is to “redefine how small businesses attract and retain customers”‚ by offering online discounted deals.

But merchants have complained that deals are often not profitable‚ and that they attract the wrong kind of customer‚ many of whom do not become repeat customers after the discounted deal‚ and do not spend money beyond what they’ve paid for the coupon.

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