With shoppers looking for bargains at every turn, one site is using the power of numbers to score bargains for consumers and give businesses some needed exposure.
Groupon.com—which combines the words "group" and "coupon"—allows shoppers to save up to 70 percent on items and services ranging from shirts to restaurant dining to skydiving packages. The company guarantees participating businesses a minimum number of customers in exchange for discounted rates, notes Andrew Mason, Groupon's founder. If enough people buy the item to reach that minimum, everyone who purchases a "groupon" gets the deal. However, if there aren't enough takers, the deal is off and no one is charged for their purchase.
"It's a nice alternative for a business to paying up front for advertising when you don't know what the return on your investment will be," Mason says. "This way, if we don't sell anything, they don't pay anything."
The site focuses on local markets, featuring one "deal" a day in each of its 24 cities, including Atlanta, Miami, Seattle, San Francisco and New York City. Deals show potential buyers the retail price of goods, as well as the discounted rate being offered, the time remaining to buy items at that price and how many groupons have been purchased. Takers then click the Buy button to purchase items.
The deal-of-the-day model is similar to that of Woot. The difference with Groupon is each deal has a "tipping point," displayed below the deal for that day. Once enough groupons are purchased to reach that point, "the deal is on." If not enough groupons have been purchased, browsers are encouraged to tell their friends about the deal and invite them to purchase items.
It's allowing [businesses] to get customers in the door at a time that can be difficult
Businesses owners can contact Groupon.com here if they want their products or services featured. And while the discounts can mean a dip in profits when shoppers use their groupons, participating can be an overall boon for business, says Joanna Robinson of Lunar Massage, which was featured on the site in late May.
Robinson says Groupon.com is especially helpful for small businesses, like her own.
"Within a day, more than 12,000 subscribers knew about Lunar Massage," she reports.
In the 11 months Groupon has been online, shoppers have purchased about 550,000 groupons, for a total savings of about $25.6 million, according to the site.
"We kind of stumbled across the model that's clearly a win for customers, but even more so, it's a win for businesses," says Mason. "It's allowing them to get customers in the door at a time that can be difficult."
Mason says the popularity of Groupon.com has surprised even him, and the company hopes to offer deals in more cities in the near future.
"It's amazing. We kind of did this on a whim," he notes. "We had no idea it was going to take off like this. Now we're just trying to hold onto the reins."
What makes the site so popular? According to Groupon, it has a lot to do with the products and services offered on the site.
"We sell stuff we want to buy," Groupon notes on its About Us page. "A great price is only half the battle—it's also got to be a great product or service. Between our top-rated business partners and unbeatable prices, you should feel comfortable venturing into and trying something new—just because it's featured on Groupon."
Shoppers can sign up to receive e-mail alerts about deals in their area. They can also ask questions about featured deals. For more information about the site, visit Groupon.com.
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Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.