Have you heard about Groupon, a Social Shopping Site?
Groupon(www.groupon.com), established in August 2008, has achieved an incredible performance in just one and a half years.
Fast growing Groupon, fresh off a $30 million round of financing that valued the company at around $250 million, is back raising new money. They have closed or are in the process of closing a new venture money at a $1.2 billion valuation, say multiple sources (one source says that’s not exactly correct, but close).
“Groupon raised (or is raising) around $130 million, says a new source, and the valuation is $1.35 billion. Russian holding company and investment firm Digital Sky Technologies is leading the round, and there’s participation from Battery Ventures as well. All or nearly all of the round is being used to purchase stock from insiders to give them an early cash out in advance of an IPO.”
| So what is Groupon?
The company features a daily deal on the best stuff to do, see, eat, and buy in cities across the United States. By promising businesses a minimum number of customers, Groupon can offer deals that aren’t available elsewhere. For example, let see Recent Deals for New York. Here they propose 10 deals from 22nd March to 4th May. It means they lead customers to rush to making a deal in 4 days.
How does it work for you? Go to their website, log on and set your town (Multiple register): you can see Today’s Deal for your town. For example, Today’s Deal on 5th May is Floral Arrangements, if 100 people buy this deal, you can get it with 35$, that is a 53% discount price but if it doesn’t reach a critical mass, you can’t. However, most of deals are matched in here.
“Groupon offers a daily deal in several cities every day, offering steep discounts up to 40 - 90% off a variety of services (i.e, spas, restaurants, etc.), if enough people buy the deal, everyone gets it, if it doesn’t reach a critical mass, no one gets the deal. The site has accummulated 3 million subscribers and currently manages roughly 40 markets. 3 million “groupons” have been purchased since November 2008, says the company.”
The important point is there are icons such as Facebook, Twitter and E-mail on the top of homepage and it is easy to spread the information to your friends. Because the success of joint purchase come from Viral marketing, people use the social networks to gather more people and to promote the deal.
Note that Groupon has 3 million users and 40 types of products and 300 million deals have been made in the one and a half years since it was founded.
| Groupon, the Key of Success
Groupon’s business model is very simple but amazingly fast growing. Actually this area is not Social Commerce but Social Shopping, and there are not success stories in this area so far.
In this field, there are Living social and Kaboodle which competitors of Groupon, and here is statistics of daily unique visitors, Google Trend.
According to these statistics, Living social has 150,000, Kaboodle has 200,000, on the other hand, Groupon has almost 400,000.
So what are the differences?
1. Dealing the product in REAL store
Groupon focused on real products in real stores. Stores which have high quality IT skill they can use many different ways to promote them such as SEO, SEM and Social media. On the other hand, stores which don’t have IT skill rely on word of mouth. Therefore the stores try to use this kind of website to promote their store and products to people live in their town, even though it is deficit for a moment.
Also in the customer side, it is very good opportunity to know new and nice store and to buy products with cheap price in their town. So this kind of point makes Groupon attractive.
2. Simple service
When you visit the website, you can see how simple it is. Checking Today’s deal for your town and if you want? Buy. You don’t need to get headache from a bunch of information.
Now in the over-information world, many people get headache by finding right information of them. – Some of people pay for filtering service.
This way makes people not worry and buy easily.
Also, Groupon selects product and service which customers want to buy and gives with discount price everyday. The opportunity would be disappeared if you don’t visit the website so that customers visit Groupon everyday.
3. Using Social Media
In the real store, you could think it is same strategy with ‘Limited to some people’ but it is different. With limited strategy, you should ‘compete’ with others so that you would not tell others. However, with this strategy, makes people tell somebody to get incentive on online. If it happens everyday, it will be huge Viral Marketing.
Through Social Media? It must be much faster.
Also, Groupon said they will launch Groupon Reward Point system. This is point system for people who apply to buy the products before reaching the minimum price. 1 point is same with 1 cent, and you can apply this point when you buy the product. This system would make people choose Groupon.
The Groupon service is very likely to be available not only the implement of internet web site but also in smartphone business.
If fast fashion brands apply this kind of system in their supply chain? For example, ordering on online(Groupon), making clothes, then sell in their store at appointment date. Do you think it is possible? I think it’s possible.
Last month, Groupon is expanding into Europe by buying Berlin-based City Deal GmbH. Can Groupon succeed in European country? I will vote “Yes”