Groupon is laying off 500 employees, or nearly 15% of its global workforce, as the struggling Chicago-based online marketplace seeks to cut costs amid falling revenues.

The total includes 293 positions associated with the headquarters at 600 W. Chicago Ave., although many employees are working remotely, Groupon spokesman Nick Halliwell said Monday evening.

The company saw a 42% decline in revenue and a $90 million loss during the second quarter, according to an earnings report Monday. The weaker than expected results prompted a $150 million cost-cutting strategy that includes “rationalizing” its real estate footprint, transitioning to a “self-service” merchant sales platform and reducing the size of its technology and sales teams.

Groupon CEO Kedar Deshpande sent a letter to employees Monday outlining the plans to streamline the cost structure, including the “difficult to digest” news of the impending layoffs.

“Put simply, our cost structure and our performance are not aligned,” Deshpande said in the employee letter, which was obtained by the Tribune. “In order to position Groupon to successfully execute our turnaround plan, we have to lower our cost structure.”

Groupon had 3,416 employees at the end of the second quarter, according to its earnings report. The company had more than 11,000 employees worldwide at its peak in 2012.

In addition to the layoffs and other cost-cutting measures, Groupon is closing its Australian Goods business, which runs on a different platform than the rest of the Groupon Goods business, making it “too costly and complex to manage on an ongoing basis,” Deshpande said in the letter.

The former CEO of Zappos, Deshpande joined Groupon in December as the company, hard-hit by the pandemic, saw its 2021 annual revenue fall by more than 56% from 2019, according to financial filings.

Once the face of Chicago’s tech startup scene, Groupon has been in decline for much of the past decade.

Google tried to buy Groupon for $6 billion in 2010, but investors said no deal. By spring 2011, Groupon was valued at $25 billion. The current market capitalization is about $415 million.

Launched in 2008, Groupon created its own e-commerce niche with heavily discounted daily deals on everything from manicures to meals, blasted out to subscribers via email. The business model subsequently expanded to include stocking and shipping products through the Goods platform, which put it in direct competition with online retail giant Amazon.

The company has since shifted exclusively to a third-party business model and now promotes itself as an online local marketplace where consumers go to buy services and experiences. Recent Chicago-area offerings include a Chicago River boat tour, discounts on Krispy Kreme Doughnuts in Homewood and a pole dancing class in Aurora.

In the second quarter, Groupon generated global revenue of $153 million, down from $206 million during the same period last year. The company had projected $670 million to $700 million in revenue for 2022, but withdrew its full-year guidance Monday because of the turnaround strategy and the “uncertain” macroeconomic environment, according to earnings reports filed with the Securities and Exchange Commission.

Deshpande said in his employee letter that the “vast majority” of the cost-cutting actions would happen this year.

Departing employees were notified Monday, with some asked to stay on for a period of time to assist with the transition, according to the letter. Where possible, they will be given the option to keep their laptops, avail themselves of outplacement services and submit their information to a Groupon talent list to be posted on LinkedIn.

Details on severance packages were not disclosed.

rchannick@chicagotribune.com



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