“Collective Buying Power” is the apt slogan of Groupon, a rapidly-expanding bulk-buying website in which members get big discounts on everything from yoga classes to pro baseball tickets to teeth-whitening services to live lobsters—so long as a certain number of members sign up for the offer.
The operation started in Chicago, and also offers city-specific deals in Boston, New York City, Washington, D.C., and San Francisco. Another branch opens for Atlanta this week, and four more cities (L.A., Detroit, Seattle, and Dallas) are expected to be up and running in the next month. While most of Groupon’s discounts sit squarely in the “disposable income” category, the company hopes to someday harness the power of the masses to be able to negotiate rates on things like health insurance and utility services, as Groupon founder Andrew Mason said in a recent Q&A with The Cheapskate Blog.
Cheapskate: Why should anyone use Groupon?
Andrew Mason: Groupon features an unbeatable daily deal on great stuff to do in major cities across the United States. We feature the things you’re doing already, but for way less. So in that sense, Groupon is a couple hundred extra bucks in your pocket each month. On top of that, we take those things you’ve maybe always wanted to try and offer them at prices you can’t refuse, giving you the extra push to get out there and do them. Things like whale watching cruises, sensory deprivation tanks, acupuncture, skydiving, even paintball. Businesses use Groupon because we deliver a ton of new customers to their door.
CS: How did Groupon grow out of The Point, which seems mostly about things like raising money for charities and petitioning for social change? How do two seemingly different missions work together?
AM: The Point is a platform for organizing collective action around a “tipping point” — which means that a group of people agree to do something or put money towards something, but only once a minimum number of people sign on. So you can participate in a group action without the risk that not enough people will participate to be worth your time. For example, I started a campaign on The Point to raise $10 billion to enclose Chicago in a dome that would protect us from the winter weather. We raised $250,000—and while it’s committed money, no one actually has to part with it because we didn’t raise enough to actually build the dome. One day…
People started using The Point to organize group purchases—for example, “If 50 people pitch in, we can all get a subscription to The Economist at 30 percent off.” We thought it was a powerful use of the site, and decided to explore it further by building Groupon to use group buying to create a win-win for local businesses and their customers.
Because of our roots, we care about integrating Groupon into the communities we touch. We run fundraisers for local projects and will be tying Groupon back into The Point to help people deal with local issues. None of us would work here if it were only about selling stuff at a discount—ultimately, we’re trying to give people an excuse to get out of the house and enjoy life. And then come back to buy more Groupons
CS: The goods featured on Groupon tend to be splurge-y sorts of items—spa treatments, dance classes, baseball tickets. They’re not exactly things people need. What sort of more practical, essential items have been on Groupon?
AM: Definitely a big part of Groupon is taking some of those nicer things that are hard to afford these days and bringing them back within reach. But we also try to use our membership’s collective buying power to negotiate great deals on stuff everyone needs. We’ve had Groupons for teeth cleaning, eye exams, discounted apartment leases, dry cleaning, car washes, chiropractors, and transportation services like Zipcar, to name a few. We’re really intrigued by the idea of using Groupon to negotiate discounts on utilities and health insurance, so I’d look for something like that one day.
CS: What things are hot items that sell out quickly?
AM: Unless there’s a capacity issue (like with theater tickets or certain small restaurants), deals don’t usually have a cap. Some of the deals that have been hugely popular include a designer jean shop that sold 1,500 Groupons, a Chicago brunch spot called Flatwater that sold almost 3,000 Groupons, and a whale watching cruise in Boston that sold 2,500 Groupons.
Our least popular deal was a live lobster delivery service for $75—only sold about 15 of those. I think it’s because we were confused and positioned them as pets, not food. But we still feel great about that deal; a Skokie resident emailed to let us know that she can’t imagine life without her new lobster companions.