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So I maybe behind the times, but today was the first day I heard about the website Groupon. For those of you that have not heard about this yet, it is an online group-buying service. What that means exactly is that this site offers daily deals on products and services, but the deal has to reach critical mass for your purchase to go through.
To me the idea of online group-buying was new, however the more I read about Groupon I found out that few websites like this appeared during the dot-com era, but failed soon after starting. Clearly, Groupon is a k-strategists here, however what I find interesting is that multiple businesses doing this nine and ten years ago failed but Groupon is profiting after only one year.
The founder of Groupon, Andrew Mason, saw a need through his other start up, The Point, and reinvented a previous business models to fit today’s society. The huge factor I believe that has allowed this business to thrive the second time around was the timing, as we discussed was the case for RedBox. This time consumers are comfortable and often buy products online and during a recession people are looking to save money. Another factor is that Mason chose to make the site localized, which I see as a success factor largely because of the economy. Right now families are taking fewer vacations and searching for inexpensive local activities. It is obvious that the founder has a clear understanding of his environment, but because both success factors I have listed have to do with the economy has he done scenario planning for after the recession.
After the recession is this business model going to continue to thrive? I am having a hard time thinking of a company that would want to be on this site during a thriving economy, because currently companies are using this site as a marketing tool to get people in their door at a time when consumers are focused on saving. Are you able to think of any other markets Groupon could move into during a healthy economy?
I would also like to touch on the fact that no competitors have been identified. However it would be easy for one to enter and potential disrupt Groupon’s business, especially if Groupon is slow to reposition itself for a flourishing economy.
Below are two articles I found that discuss Groupon.
http://www.wired.com/epicenter/2009/11/groupon-local/
http://www.google.com/hostednews/ap/article/ALeqM5hUEFe0rOOO5UfALNMi3f1DGk4W5wD9BC9VRG0
Here is an article about Mercata, one of the similar websites created during the dot-com boom.
http://news.cnet.com/2100-1017-250529.html
As long as businesses want more customers, it seems this is a good idea and likely to continue to gain ground even in a good economy.
ReplyDeleteThere are local competitors, including BuyWithMe.com who has partnered in Boston with boston.com and seems to be thriving there. I've seen others in other cities, though not doing too well.
Group-on is great—I get really excited to get my email with the deal of the day! I first learned about it from friends in Chicago who have taken advantage of the great deals Group-on offers. One thing that I think separates it from other companies trying to do this, is that it has discounts on things that people will actually use. Some of the things I’ve seen for Nashville have been cleaning services, gym memberships, clothing stores, and restaurants—all things that people are likely to take advantage of. Like you said, I think the economic conditions have made this a profitable company, but I think it will continue to be a profitable company once the economy starts to right itself.
ReplyDeleteWell, here in Brazil we are not in recession as US, and group on and all its copycats are grow very fast indeed. Group On has only 3 months and is the 30th most visited website in Brazil (Alexa statistic)
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