I recently attended a great technology event organized by Battery Ventures, a West Coast venture capital firm. The theme of the event wasÂ monetizing the location-based Web. Not surprisingly, group-buying services were a hot topic. Discussion was amplified by the presence of Andrew Mason, founder and CEO ofÂ Groupon, a deal-of-the-day Web site, empowered by group buying localized to major markets.
Groupon is on a tear with its flash fire sales, as evidenced by rapid U.S. expansion and recent fund-raising thatÂ values the start-up at over $1 billion. Its success has prompted an industry of other group-buying Web sites, and renewed excitement around the general category of group purchasing. Indeed, VCs are all over these start-ups.
Groupon is great, and I recommend you try it out. It’s is a fun, quirky daily email with an uncanny ability to spark the consumer instinct in all of us. Ever turn your head while driving past a going-out-of-business sale? Groupon subject lines have the same impact on me when they arrive in my email inbox.
Groupon is an exciting story, but group buying wasn’t invented yesterday. While unsexy, dorky and perhaps wreaking of suburban tendencies, my favorite group-buying phenomenon is far larger and more impactful. It’s calledÂ Costco.
According to Wikipedia, Costco is the largest membership warehouse club chain in the U.S., and one of the top three retailers. In existence for over a quarter century, Costco sells products at low prices, and often in bulk. It does not carry multiple brands of the same product, which results in mores sales from single vendors, enabling further price reductions. If Costco feels the wholesale price of a product is too high, it will refuse to stock the product.
Moreover, Costco has built one of the best private-label brands in history — embracing products with quality higher than most mainstream premium brands. That high standard forces competing mainstream brands to work harder to prove their value. Costco’s bargains are also enhanced by a worker culture that is universally motivated to delight its customers (or buyers).
Costco sends me hot deals via its email newsletters. I open those as fast as I do the ones from Groupon. While the types of deals are different than Groupon’s locally based ones, they’re often still outrageous, usually more relevant, and always more plentiful.
That’s group buying power for the people!
This also was my column in MediaPost.