Groupon- have you heard of it? The first time I did was in Christmas 2010 when some friends of mine in the US told me about these 'amazing' deals you could get.
Here's how it works: Groupon finds a business, say a restaurant, which wants to increase its demand on a certain night of the week when it's capacity utilisation is really low, say a Tuesday. Groupon approahces the restaurant telling them that they will be able to find enough customers to fill the restaurant up on a Tuesday night so long as the restaurant offers a significant discount, say 50% off. Then groupon sends an email to all its subscribers saying there's an incredible deal for such and such a restaurant on Tuesday if they get 50 people to sign up. 50 people sign up and pay Groupon, Groupon gives them a voucher and this voucher buys them a meal at the restaurant. Groupon takes a cut, customers get a good deal, and businesses fill up their excess capacity. Everybody's a winner, right?
(As a persnoal aside: I was signed up for Groupon in the first half of 2011. I got a deal on dog racing at Oxford Dog Track for £10 admission plus a free burger. Of course I ended up spending about £30 on bets, so of course the Dog Track is happy even if they have to offer a big discount. Think of it as a loss leader).
As it turns out, everybody's a winner, and that includes lots of copycat web businesses that are copying the Groupon model. As the article says, you can't patent a way of selling coupons. And with this model there is no clear advantage of being the first to market. So in the past few months there have been lots of copycat websites (have you seen that annoying Wowcher! advertisement lately?) which means that it's going to be a tough year for Groupon.
It goes to show that if you can't protect your idea, you don't really have much of a business.
Here's the link:
http://www.economist.com/node/21533425
Happy reading!
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