Monday, January 10, 2011

Groupon Case Study: How To Succeed Your Sales

Groupon is one of the fastest growing company in the ecommerce industry. The concept is simple: It proposes only flash sales, which allows the website to have attractive pricing. Nevertheless, as Groupon doesn’t seem that well organized, it seems some brands which have used the this retailing channel were not quite happy about the end, as they have been blown out by the success: They had not enough supply to please the generated crowd of buyers.
I read this great article for Business Insider about Amerian Apparel which flocks Groupon, thanks to a successful campaign. I like this article as it gives us a good case study on how to use Groupon.

But a source from American Apparel tells us he's seen sales numbers following his company's deal with Groupon "that disprove many of the ongoing doubts about Groupon."
He says customers who purchased the $25 Groupon – worth $50 – ended up spending an average of $70 once they cashed in the deal.
Our source says the best part of the deal, though, was how American Apparel was able to add a whole bunch of Groupon customers to its own email list.

"The killer was email address acquisition... We converted approximately 25% of in store redemptions into signing up for our email list... which is on track to generate an additional five to six figures in online revenue."

Groupon ended up selling 133,000 Groupons at $25 a deal in the US for a total revenue exceeding $3.3 million. Our source tells us Groupon came out of this deal with "much much less than half" of that $3.3 million figure.

But in my opinion, the main reason why it is experiencing such a success, it is probably because American Apparel prepared well the outcomes of the channel:

  • It proposed a large enough supply to content the demand. In France, it is forbidden to advertise for products which you know you won’t have enough to please all the demand it will create (what we call “produit d’appel”). Because it creates dissatisfaction, and hence gives a bad image both to the brand and the retailer.

  • It set up a system to boost its email data base thanks to the campaign. Therefore they were able to completely retain this customer data base to use it for further sales.

I believe Groupon is still a retailing channel that needs to be explored. The more retailers and/or brands will have experience with it, the better they will be able to manage it. Groupon is too big now to be used with amateurism.

What do you think about it?