Published On: Wed, Jan 15th, 2014

Eric Lefkofsky’s Groupon Pays Out $43 Million to Add Fashion To His Collection Through ideeli

Ever growing coupon sellers Groupon acquired ideeli, the  “flash sale”  discount clothing website to add to  its merchandising division, called Goods.

Eric Lefkofsky Groupon

Eric Lefkofsky / Getty

Eric Lefkofsky,  CEO  of  theGroupon, the rapidly expanding online marketing website  particular known for their discounted gift certificates, has stepped into the market once again and it looks like he has picked up another bargain.

Lefkofsky, who was one of the original investors  in Groupon when he was founded in 2007 and took over the role as CEO from Andrew Mason in 2013, has spent considerable time and money over the last few months looking for companies to acquire to add to the Groupon portfolio.

The latest addition, Ideeli market so-called “designer” goods through online short run sales, a trend that has developed rapidly online, and simulated a ghost of a number of major competitors such as HauteLook, the Gilt Groupe, Rue La La among others.

Ideeli undertakes to feature site features a different selection of brands each day, offering spectacular discounts sometimes reaching as high as to 90%.

While the formula has brought in considerable turnover, the company has failed to return a profit in any of the years since its foundation in 2007. In 2013, ideeli have far from an ideal year, turning in a loss of $30 million.

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According to market speculation, investors in ideeli will be far from pleased with the sale  price that Eric Lefkofsky succeeded in negotiating, with the  $43 million in cash that  Groupon bought Ideeli for in no way helps to recover the considerable losses that the company have incurred during the years of trading, as well as the sunken to the company $107 million in venture capital from 2007 to his last injection of capital in 2013.

Announcing  the acquisition Lefkovsky stated that Groupon are thrilled to add ideeli and their team to our company.  “Ideeli extends our fashion presence and brings great relationships with many of the top brands in apparel. Our customers have a demonstrated appetite for these offers.” He summed up.

According to Lefkovsky , Groupon, it intends to run Ideeli as a separate entity, retain its 150 full-time employees and hopefully turning it into a profit making concern.

Since its foundation Ideeli has acquired around 6 million subscribers and reached average turnovers of over $100 million annually. On the other hand Groupon is estimated to bring in around $2.5 billion in income during 2014 and continue to add to their subscriber base currently numbering around 200 million.

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A number of industry analysts speculate that Groupon have made a calculated risk and certainly picked up ideeli at a very good price, with fashion remaining one of the top categories for e-commerce and one that is liable to keep growing. On the downside Mark indications are that the flash sale trend appears to have lost its momentum while at the same time having such an unprofitable business on their books may dilute Groupon’s albeit healthy profit margins margins.

Early indications are that the market was less enthusiastic about the purchase than Eric Lefcovsky, with Groupon’s stock falling  5% on the news, closing the day at $11. Groupon can afford to absorb such a setback with its stock  having more than doubled in value since Andrew Mason left the top post in 2013.

Eric Lefkofsky attended the University of Michigan graduating with honors in 1991, and later gaining his Juris Doctor from the University of Michigan Law School in 1993.

Lefkofsky and his  wife Liz Lefkofsky wife have pledged to give half their wealth to charity, joining more than 100 other people from around the world who have taken the “Giving Pledge”  an initiative started by multi-billionaires  Warren Buffet and with Bill Gates. By taking the pledge, the world’s wealthiest people are urged to commit half their wealth to the charitable organizations of their choice.

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