e-commerce

The Groupon Bubble is Going Burst

By Mark Evans in Social Media 26 Comments Tags: , , ,

Right now, Groupon is the cat’s meow – a fast-growing business with a valuation of apparently $6-billion. It’s the hottest thing (aside from the iPad) in the high-tech world, and attracting scores of wannabes.

But for all of Groupon’s success, it makes me nervous. Why? I’m not convinced Groupon has staying power. Sure, it’s uber-popular but how much longer will consumers be captivated by the flurry of deep-discount offers hitting their inboxes? Groupon is a novelty, it’s entertainment but is it the future of e-commerce?

My take is probably not. My sense is Groupon’s popularity and star power has peaked even though sales may continue to grow for awhile. I think consumers will start to lose their enthusiasm for group-buying as they discover that while the deals may be on the surface attractive, the number of services and products actually used is far from what they purchased. In other words, the numbers don’t really work.

At the same time, I believe many companies will start to question the attractiveness and economic sense of group-buying services. It’s sexy right now to give it a whirl but is there really a healthy ROI in offering discounts of more than 50% for products and services. Do enough customers who take advantage of these offers become regular customers to justify the cost of using group-buying services?

In fact, the entire group-buying phenomenon is fascinating and bubble-licious at the same time. It smacks of the original dot-com in which scores of start-ups launched themselves into a marketplace only to see the market suddenly retract.

For consumers, group-buying is attracting because we’re still getting over from the hangover of the economic downturn. Many people are still trying to behave like they should be frugal, although this doesn’t mean doing anything drastic like cutting off your cable or eating all your meals at home.

Groupon and other group-buying services let consumers eat their cake and have it too. They let people believe they’re saving lots of money while still satisfying their need to buy stuff – much of it they don’t need. When the economy starts to see a firmer recovery, you have to wonder if the allure of group-buying will begin to fade.

If I were Groupon’s founders, I would have taken the $6-billion offer from Google in a heartbeat. A bird in the hand is worth two in the bush, and my take is the group-buying “bird” is going to fly away.

The Joys of Analog Retailing

By Mark Evans in Advertising/Marketing, Media 5 Comments Tags: , , ,

The CBC’s Jian Ghomeshi had an interesting “essay” a couple of days ago on his show “Q” in which he talked about how there was a place within the book retailing landscape for independent, big-box and digital stores. His comments were triggered by the closure of a small bookstore, This Ain’t The Rosedale Library, after apparently failed to pay its rent.

Ghomeshi contends – and I agree – that different types of retailers meet different needs. If you’re looking to purchase the best-seller, then by all means use Indigo or Amazon, or visit the big box book store at your local mall. But if you’re looking to really experience the book-buying process and get insight from people who live and breath books, it makes sense to patronage the independent book store.

For all the focus on e-commerce, buying online is an antiseptic experience. You surf, search, place into cart, and pay. There’s nothing romantic or visceral about buying a book online, although it is convenient and relatively hassle-free.

Going to book store, however, means smelling, touching and browsing books. You can enjoy spending time at a book store even if you don’t make a purchase. There’s something pleasurable about immersing yourself within the analog-ness of all that paper. And there’s something exhilarating about walking out of a store with a book as opposed to having to wait a few days for the courier to show up.

Call me old school but book stores, particularly independents, are a key part of our retail and cultural fabric so here’s hoping they don’t disappear anytime soon.

Five Questions With…Well.ca’s Ali Asaria

By Mark Evans in Five Questions With... No Comments Tags: , , , ,

In the wake of Well.ca raising $1.1-million from a group of angel investors, I fired over a few questions – actually, five – to the company’s founder and CEO, Ali Asaria:

1. What’s your take on the financing landscape for Canadian start-ups?
There is a lack of good investment options in Canada. Any entrepreneur that’s tried to raise financing here knows that. But the solution to this problem isn’t so clear — it’s a complex problem that will require the slow organic development of a startup business ecosystem.

It doesn’t really matter for us entrepreneurs: all we should be focusing on is building long-term sustainable business models that scale. That’s our job.

2. How do you account for Well.ca’s strong growth?
Well.ca’s growth is entirely based on word-of-mouth marketing — we don’t spend a penny on traditional marketing. The strategy is simple: over deliver on value to the customer, treat them like family, and they will tell their friends.

Our approach to business is important part of what’s brought us here. We’ve always focused on building a culture of doing more with less, we’ve always made sure that we measure everything that we do, and we’ve always poured our hearts into showing our customers we care.

3. Have you made any strategic adjustments or changes that have really paid off recently?
One of the smartest things we’ve done recently is to publish statistics on every line of operational profit and expense to the entire company on a weekly basis. Every single person in our company knows where every dollar goes in our operations, marketing, and staff costs in order to fulfill orders.

At first, this move was a scary one. We worried what would happen if we were so transparent about our numbers. In the end, it was one of the smartest moves we made: financial transparency builds trust and accountability within our company. Everyone knows what they can do to help the bottom line. It makes absolute sense now.

4. In terms of growth, where do you see Well going? Do you have a focus on particular verticals?
One of the unique parts of our business is that there is nothing in our DNA that binds us to selling only health products — our style of being super-nice to customers, our unique software and our distribution model can work in many verticals. In that sense we have a lot of options.

Still, for the time being, we have a lot of health and beauty related verticals that we’re pursuing this very second. Stay tuned for more brands in more categories.

5. Any advice to entrepreneurs looking to grow an online business?
The thing we’ve learned the most is that integrity is the most important thing in building a business. When building an online store, it’s really easy to forget that each site-visitor is a real person. Large online businesses need to look towards small, friendly local businesses on how to establish relationships based on smiles, honesty, and kind words.


Dancing Outside the Digital Domain

By Mark Evans in Media, Web 2.0 No Comments Tags: , , ,

With e-commerce continuing to see strong growth and cloud-computing becoming accepted, it’s sometimes easy to forget that the sales of products and services is still very much alive and well in the “real world” – people are still buying things off-line when they could easily do so online.

It’s a pretty obvious and straightforward notion but once in a while you get reminded about how “analog” behavior is still thriving in an increasingly digital world.

This was illustrated in yesterday’s New York Times, which had a “Digital Domain” story about Redbox, which operates 15,600 kiosks in the U.S. that rents videos for $1/day. Redbox rents more than 7.5 million movies a week, compared with the 10 million/week rented by Netflix.

The story includes a great quote from consultant Tom Adams about why Redbox is thriving.

“We’re only 10,000 years out of caves,” he said. “Humans like to go out and get stuff and bring it home – we’re just wired that way.”

Redbox’s success says about human nature and how we’re psychologically designed to be social and to seek the company of other humans – even if we’re talking about a business transaction involved a kiosk.

It’s the same kind of behaviour that explains the popularity of events such as DemoCamp that attracts lots people who spend a lot of time on social networks.

While you can interact and build relationships digitally, there is a need and appetite to also connect physically.

In fact, I would argue that you could have a really strong relationship with someone digitally but it goes to a completely higher and different level when you meet someone in real-life – even if only happens once.

Whether it’s video kiosks or networking opportunities, there’s a growing place for digital but it’s not going displace the real-world any time soon.

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