Groupon is a Great First Attempt at Online-to-Offline Commerce, But It's Just the Beginning, Says Adility CEO Thomas Cornelius
“In order to really get this to be scalable….you have to flip it around so that the merchant has control,” adds Adility EVP Kenny Douglas.
With today's launch of Groupon's (NASDAQ: GRPN) long-awaited IPO, merchants and competing daily deals sites alike are watching with a close eye. Adility, a San Francisco-based technology company that provides a framework of web applications and development tools for brands, retailers and merchants, was quick to speak out on the matter.
“The success is well-deserved,” Thomas Cornelius, Adility's founder CEO, told Benzinga this afternoon. “The overall online-to-offline commerce is already $1 trillion. The Groupon-style business (steep-discounted daily deals) will only be about 3% of the online to offline market. So we expect to see a few more companies that quickly rise to enormous revenue numbers just because the online-to-offline market in general is already five times larger than the e-commerce business. Online influence of offline purchases is already constituting over 50% of retail.”
Thus, Cornelius believes that there will be others who emerge in the online-to-offline space. “The model of daily deals fits well for some merchants but doesn't fit well for most,” he said. “It is not sustainable to maintain 50% discounts.”
Long-term, Cornelius expects the market to gravitate more toward “loyalty or even real-time, full-priced inventory.”
“I think Groupon is fantastic for online-to-offline,” he continued. “It is a great start as the first company to go public in this space. But it's literally just version 1.0, and is a bit comparable to companies that went public before Google (NASDAQ: GOOG), and it is not the final version of what the online-to-offline market has in store.”
Kenny Douglas, Adility's executive VP, adds, “Where there's a fundamental economic hurdle is that you have to be merchant-centric, where the merchant can control the economics of the deal and not be mandated by some very steep discounts, which is the way their model is today. It's pretty focused on Groupon and Groupon's economics, which is the way you should be if you're looking at it from a business. But as soon as you look at it from a merchant's perspective, it becomes less attractive. In order to really get this to be scalable….you have to flip it around so that the merchant has control.”
During our conversation, Cornelius took a moment to speak about one of the uses of the Adility platform. “Over the last two years, the cost for maintaining sales groups, individual sales reps for each individual city, just skyrocketed,” he explained. “So what these companies did was use the Adility platform to communicate with each other. It's kind of a LinkedIn (NASDAQ: LNKD) / ad network / technical platform.”
The Adility Gateway, Cornelius said, “provides interface for merchant to create an offer, and then the gateway pushes this offer out into an online database, the Adility Cloud. From there, online publishers can take these offers and help present them [to their customers] in a Groupon-like daily deals site.”
“It is ridiculous to have 500 companies build 500 sales forces,” Cornelius continued. “When you compare this to the yellow page business, the individual sales person in the yellow page business, or online director, is a dying breed. So why, all of a sudden, because of the spike of this business that has created an influx of cash flow, is used – or misused – to fuel the hire of more and more sales reps? It is not economical to do that across 500 similar-type businesses.”
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