Let me start off by saying that I’ve been meaning to write this post for weeks, if not months. I first heard of Groupon while visiting family in the Hampton Roads area and looked it up to see if there was something similar for Richmond. It had yet to launch in either location, but at least the publicity had started in Tidewater. It’s such a simple concept at its foundation: Buy with friends, everyone saves. My first thought was pooling money in college to rent a van for a weekend trip to the beach or camping. But clearly, Groupon has always been about something bigger. By the time it launched in Richmond, I had begun to see and hear about it everywhere. Daily emails from Advertising Age, articles in USA Today and the Wall Street Journal, even the TV news magazine Nightline (embedded below) were all doing features on the group buying phenomenon. For those of you who don’t follow along with those resources, here’s the story.
Groupon was founded by Andrew Mason, now 29, a musician by trade, who was doing web design work with a Chicago serial entrepreneur by the name of Eric Lefkofsky before accepting a scholarship to pursue a Master’s degree in public policy from the prestigious Harris School at the University of Chicago. The engine behind Groupon was developed as part of a fundraising site called The Point, where people could pledge donations to a cause, but not be charged until the pre-established goal was met. The site attracted a wide range of non-profits, but ultimately, Mason’s desire to monetize the project lead him away from charity and towards collective buying. And thus, Groupon was born in November 2008.
The ‘cult of Groupon’, as detractors have called it, developed rapidly. Mason told Nightline that they started with just seven employees, but has since grown into the old Montgomery Ward headquarters in Chicago’s River North district, with a workforce of several hundreds. The product seems so obvious: One great deal, every day, in your inbox. Like The Point, when a pre-determined sales figure is reached, the deal is on. Groupon and the deal-offering business split the proceeds.
Naturally, with such stunning success and an easily replicated concept, Groupon has inspired myriad imitators. In Richmond, in particular, LivingSocial seemed to launch at the exact same time. Established sites like Yelp have gotten in on the act, while one-time Internet titan AOL has also set aside a URL for a similar project at Wow.com. Even the largest retailer in the world, Walmart, is looking for a piece of the action: it debuted a feature called Crowdsaver on its Facebook page that offers a low-priced offering based on consumer demand as demonstrated by the amount of “Likes” a deal receives. Facebook itself will surely get in on the action soon.
With two years of dizzying success under their belts, as well as a boatload of revenue and investment cash, Groupon seems adamant to maintain its position, aggressively buying up clones around both the country and the world. A nationwide offering from the Gap that broadened the otherwise locally-focused business model attracted almost a half million individual sales. You can expect similar deals to follow. Meanwhile, the imitators who don’t sell out will seek to distinguish themselves, perhaps with added gaming elements or rewards for repeat buyers. For many consumers still fighting the effects of the economic downturn, the prevalence of such deal sites is a breath of fresh air.
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