Groupon Inc. is expanding its in-store payments business with a new service that lets merchants identify customers with the company's coupons and enable them to pay for purchases using Apple Inc.'s iPad mini.
The service, called Gnome (pronounced genome) lets local businesses process coupons without a printed or digital voucher, accept credit-card payments and customize marketing campaigns for vendors to target specific customers, Groupon said in a statement today.
Merchants will pay Groupon a small monthly fee for the tablet and also a transaction charge. The introduction of the service follows more than a month of trials in five cities, where 98 percent to 99 percent of businesses approached decided to adopt the system, Groupon Chief Executive Officer Eric Lefkofsky said in an interview.
The move pits Groupon against in-store payments hardware makers and software makers, including VeriFone Systems Inc., Micros Systems Inc. and Salesforce.com Inc., and is Lefkofsky's latest effort to broaden the business from its roots as a daily deals service and compete with e-commerce businesses like Amazon.com Inc. So far it's proving a rocky transition as the company struggles to convert its efforts into earnings.
Groupon's shares have dropped almost 50 percent this year, and plunged 21 percent on May 7 after the company forecast second-quarter earnings that trailed analysts' estimates.
The new service enables merchants to redeem coupons via Bluetooth or search for customers' details. Groupon will also offer a credit-card processing service sponsored by Wells Fargo & Co. The service will integrate with accounting software QuickBooks and Xero and have around-the-clock support.
"Every merchant we have will be getting a Gnome tablet," Lefkofsky said, adding that the program will be rolled out in every U.S. market this year.
It's a significant move in the market for the Chicago-based company, which currently only operates a niche payments system, called Breadcrumb, for high-end restaurants.
"We believe we are giving the merchants the power to map the DNA of their business, to bring the right customer to their business at the right time," Lefkofsky said.
While Gnome will face a number of competitors, it won't be sparring heavily with Square Inc., which provides hardware that turns smartphones into a device that accepts credit cards. Square is only used by a small portion of Groupon's merchants, Lefkofsky said.