To say that Groupon has taken the group buying space by storm over the past two years would be an understatement. It is a phenomenon that has swept across the US and the world and has defined the “group buying” market.
It is impossible not to be impressed by these numbers. In the past 10 months alone, Groupon has exploded and now claims 30 million subscribers, 3,000 employees, offices in 30 countries and publishes daily deals in 500 cities. In August 2010, Forbes named it the fastest growing company EVER.
Even though we hear lot about Groupon, people still seem to be getting confused between group buying and private sales sites. Here is a quick explanation:
Group buying /collaborative buying / community buying:
- Customer acquisition marketing tool for local businesses. Requires a minimum number of purchasers to indicate interest before the sale becomes live.
- Sites include: Groupon, LivingSocial, BuyWithMe, Bloomspot, HomeRun, TippR and now OpenTable’s Spotlight.
- To be notified of new deals you just need to sign up for their daily deals email.
- They tend to focus on a hyper-local approach featuring deals in specific markets. Local merchants create deals that are featured on the site, often with steep discounts in order to attract new customers.
- Promotions can last 24 hours (Groupon) or up to 7 days (BuyWithMe) and normally generate hundreds, if not thousands of new customers.
Private sales sites:
- Invitation only sites that feature limited time sales.
- They tend to be more focused on luxury brands, as those brands are the most sensitive to discounting and are more comfortable doing this in a private sale environment.
- They normally attract less new customers than group buying sites can generate – but the quality of the customers is better.
- They tend to have higher quality brands and appeal to a higher quality audience.
- Private sale sites rely on world of mouth and referrals by friends to build their communities.
- Sites include: Gilt, Rue La La, Jetsetter, Voyage Prive, Vacationist.
At the PhoCusWright Conference we heard from Groupon’s COO (and ex CEO of SideStep), Rob Solomon who announced Groupon wants to “redefine travel” and that travel is “any time someone leaves their door”.
He cited examples for the travel industry of hotels selling thousands of room nights, specifically the Fairmont Sonoma, which sold over 2,700 vouchers in 24 hours. This is actually low for a “Groupon” – many of their sales range between 2,000-4,000 vouchers sold. Solomon explained how they want merchants to perceive them as a platform, just like Google, Facebook, Amazon, Twitter and Apple.
So what is the key to their success?
According to Solomon: Local deals + Local people = Success. There are many reasons I think Groupon has taken off; timing, the consumer’s increased desire for deals, first mover advantage, funding…. it is certainly a challenge for other players to keep up, and as sites are cropping up every day; and many struggle to carve out a point of difference, especially in the eyes of merchants who are all familiar with Groupon, for reasons both good and bad.
What’s next for Groupon?
- They’ve already announced their plans for personalization. This also means more opportunities for merchants and better, more relevant deals for shoppers. With the size of their membership, they can potentially serve 50 deals in a market like Chicago, with over 1 million subscribers alone.
- According to Solomon, everyone should be focusing on mobile, social, local, real time, global opportunities – more clues into where they are going to focus.
- Groupon plans to partner with companies in the travel category to help them attract more customers.
- And we’ve all heard the Google rumors…