Entries in Groupon (2)

Monday
Dec212009

Gilt Groupe and its clever e-commerce pull

Lately I've noticed a resurgence of new e-commerce destinations practicing clever tactics to once again make online shopping fun, since the amusement of eBay has made way for the practicality of Amazon. Swoopo is cashing in on the trend of integrating of gaming to other online activities (although I still believe that it is a scam); while Groupon uses daily deals that expire at midnight and become free for you if you get enough of your friends to buy (a truly addictive site). Both sites have been wildly successful lately.

Another site seeking to be your guilty pleasure: Gilt, a "by invitation only" site to gain access to very high-end luxury items at great discount. Once inside, you have the opportunity to click as fast as you can every day at noon, when a new set of items are made available. CEO Susan Lyne describes it as "like a sample sale online" except of course, you don't have to wait in line at 6 AM or fight hoards of other shoppers to grab the last size 4. Similarly, the refined Ms. Lyne is clear that "it's not just because it's discounted that it's fun; rather, there is a competitive aspect (like the early eBay) only you get instant gratification." The best items do sell out quickly, so you should arrive prepared, say knowing what parts of the Oscar de la Renta herringbone collection you want to hit first:

So how to gain an invitation to this elite private shopping network? Go to website. Request invitation. Receive invitation the next day. Register. Or you can go to Yelp and see the type of clientele who is "obsessed", "addicted", and "in love" with this website, many of whom claim to hold access to a coveted invitation.

This site is a smart addition to the e-commerce scene. Rival Ruelala was recently purchased for $350M, while prime competitor Vente Privee is expecting to do $750M in sales this year. Gilt Groupe, meanwhile, grew four fold this year as is expecting to do $500M in sales next year, up from $200M this year and less than $100M the year prior. The site is pretty and fun and does a good job of feeling rich which is a nice change from the cheap feeling of eBay or Zappos.

Tuesday
Jul282009

Not your mother's coupon -- Groupon taps into collective purchasing power online

Groupon is a surefire approach to help jumpstart a consumption-driven economy. Amazing deals on a diverse set of things that aren't necessary, but totally desirable. Things like facials, which normally would seem luxurious, suddenly become so reasonable that you can't help but say, "at this price, I can't resist!" There goes $50 when you were really perfectly content spending $0.

The company leverages collective purchasing power, offering a daily deal to a business in your area (selling anything from paintball to eyebrow waxing) that only kicks in if a sufficient number of people commit to the deal. Buyers are thus encouraged to spread the word to their friends, providing exceptionally quick word-of-mouth marketing to the seller. Many sellers agree to the deal not because they make money on it, but because it provides such good exposure. Each deal expires at midnight, forcing buyers to make quick decisions rather than wait and think about.

The site has turned close friends of mine into near-spammers, forwarding the daily deals to all of their friends. Amazingly, they do this not to help secure the deal, but because they legitimately think that this deal is so awesome that they just want to share it.

The deals are all pretty high end (well-recommended spas, innovative theaters) but they are often fairly new (hence why the businesses agree to the deal) so the site offers an great way to experience an up-and-coming business before it gets hot, at a discount. The deals also encourage you to try out something you've never done before or have been meaning to try, but have put off.

This is a clear part of its success -- Groupon makes coupon collecting cool. Its staff does significant due diligence on companies -- hence why it is only rolled out in certain cities -- beginning in Chicago, but now with representatives on the ground elsewhere discovering new spots. I've always hated coupons. I was slow to adopt, but now I admit that this site is mildly addictive.

By facilitating the interaction of new companies and experimental consumers, Groupon provides a great service to each. As an added benefit, Groupon actually makes money, too. It's one of those rare web companies with a natural business model that made it nearly immediately profitable -- it takes commissions, sometimes as much as 50% on deals for referring new business. This marketplace actually functions in the best interest of the business, the consumer, AND the middleman.

Flikr credit: .Uvitra