Opportunity for a new player in Local Commerce

Groupon, the king of Local Commerce,  has taken the world by storm. Within 2 years the company is worth more than $6 billions. And they might be on verge of IPO sometime next year. Local commerce accounts for the biggest chunk of user spending all over the world. Here is an analysis about the current market scenario and the opportunities that it opens for new players who want to enter this nascent industry:

Benefits – Retailers

Groupon provides following benefits to retailers:

1. It brings customers to the store/shop.

2. Retailers pay only when the customers come in (performance based marketing)

3. There is a “minimum threshold” for the number of groupons to be sold. This provides incentive to retailers because it increases their footfalls.

4. “Free marketing” for retailers: They do not have to pay “cash” to do the marketing. Groupon does it on their behalf. Although retailers pay in the form of “service” but they prefer to do that because that’s what most small retailers are more comfortable with.

Benefits – Customers

Groupon provides following benefits to customers:

1. It offers them deep discounts (around 50%) to use the retailers’ services.

2. It introduces good /exciting unheard services to the users.

3. It is very simple to use.

4. Daily deals via email keeps things simple and exciting.

Groupon’s success Factors:

1. First mover’s advantage

2. It creates a sense of urgency with buyers because the deal will close in one day.

3. It is simple to use

4. Brand value

5. Users find the anticipation of a new deal exciting. “What’s the Groupon of today?”

Issues – Retailers:

1. Most retailers are not used to handling a sudden rush of customers in their premises. Groupon provides them walk-ins that are multiple times their usual walk-ins. This puts a lot of pressure on the operations of the business. It affects their customers service also, impacting the regular customers as well as the groupon customers.

2. Retailers give deep discounts to get new customers in hope that these customers will become their permanent customers. Unfortunately, most groupon customers are “price-sensitive” customers who usually do not return to the retailer after their “groupon” discount is over. In short: This acquisition strategy does not work because the customers are not “acquired”.

Issues – Customers:

1. Customers want to use groupon (upto 50% discount) and also want to get good service. Usually these 2 do not happen together. This is because of 2 main reasons: a) When a retailer is promoted on groupon, their customer service suffers (due to above said reason), and this impacts the groupon custoemer. b) Retailers sometimes do not “treat” groupon customers with 100% customer service and attention because they know that these customers are “disounted” customers and therefore most likely not “return customers”.

Summary:

1. “Acquisition” strategy should acquire customers. Groupon provides new walk-ins into the stores, but it is not able to “acquire” customers for retailers. In the end, retailers end up paying deep discounts without getting new regular customers for this business.

2. A new solution is required that would “acquire” customers for Local Retailers. This is a nascent market and any new comer who focuses on converting a new customer into a regular customer will have an edge.

 

~ Ciao

 





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Current Socialgraph has limitations

Many Internet experts are saying that  “Socialgraph” is very powerful and will be the base of a new set of innovative applications in future. My theory is that the connections on the Internet (aka Facebook) are good but they have their own limitations.

Here are 3 characteristics of Facebook stream and socialgraph as we see it today:

Not very useful: Facebook  filters (organizes) content based on Socialgraph and then puts it on stream. My personal observation is that the content that I get on Facebook stream has very little value. They are mostly “b’day wishes from friends-to-friends, photo tagging, and hilarious comments”. They are funny and good-to-have but are NOT very important.

Real-to-Virtual Mapping: Theory behind Socialgraph is that a person’s qualities (personality) can be characterized by his/her friends and their interactions. This theory is correct and works well in normal situations. However, when we talk about interactions on Facebook, 2 important things are missing: a) My friends on Facebook are NOT my “friends”. They are acquaintances. b) My interactions with them is limited to mostly 3 things as said above.

Interactions: Interactions on Facebook are mostly “positive”. In real life, we interact with positive and negative comments/behavior. Unless, we replicate “real life communication” within Social graph, it will be very difficult to deduce anything substantial out of it.

These observations point me to think that either Socialgraph is not powerful enough or Facebook is not making good use of it.

Looking at the money and resources that Facebook has, I tend to believe that they are doing their best in making SocialGraph useful. Maybe the current  Graph itself has limitations and needs to be extended.

~ ciao

Foster innovation in your Organization

Here are 5 things that medium-large companies can consider to spur innovation:

1. Make processes less rigid: Most companies have well-defined processes to meet delivery goals of their projects. But, this comes at a cost of “innovation” because employees get “used to” working in processes and therefore do not “look for” innovative ideas. If the processes are not very “rigid”, this will prompt employees to “think outside-the-box”. That will eventually lead to innovation.

2. Employee rotation: Generally careers move in a vertical direction. People get good understanding of the vertical (HR, Finance, Marketing) but have no understanding of how other verticals work. Moving employees in different verticals will put “some” employees out of their comfort zones and force them to learn new skills. During transition, they will question the basics of the department, and that will lead to looking at things from a different perspective.

3. Open culture: Innovation is about thinking out-of-the-box. Support from top management for openness will encourage employees to communicate their “wild” ideas upwards. Some of these “wild” ideas can spur innovation if they reach the right top-management.

4. Networking: Large companies are like “cities” or “towns” where people do not know about each other. Fostering networking (from different departments, locations) will lead to brainstorming which is the seed for innovation.

5. Outside-the-Industry: Look at companies out-of-your-industry to see how they solve problems. Find out if some of those initiatives can be brought into your own industry (with some modifications). For example: Outsourcing started with manufacturing…and then moved over to Software services, finance, and market research.

ciao~

New features for Job-boards

Job-boards have made good changes in the past 5 years but still a lot can be done to improve the experience of recruiters and the users.

Here are 5 good-to-have features for current (or new) job-board companies:

1. Resume hosting service: This will be like data hosting service where the user’s resume will be viewable online. There can be 2 versions of it, leading to 2 revenue streams from this feature: (1) The company can hide “contact info” and therefore the recruiters will have to pay to view the contact info. (2) Users can pay some amount and make their complete resume “viewable”. Yes, LinkedIn has resume..but thats very “primitive”. Users should be able to upload the files, or use templates to change the display.

2. Ranking: User should be able to view his ranking vis-a-vis other applicants for the position. For example, if I apply for a job “A”, then I should be able to know how many other applicants have applied and where do I stand vis-a-vis them in experience, education, and other comparable attributes.

3. Feedback Box: As an applicant, I want to prepare myself for the upcoming interview. Feedback from other applicants who applied for the position(s) in the company would help me understand the recruitment process of the company. I will be able to identify beforehand what qualities are being sought for that position…and this in turn will enable me display my best qualities during the interview. Feedback could be kept anonymous..or it could be paid service..but it depends on the implementation.

4. Connections: I have friends on Facebook, LinkedIn, Orkut, Email-addressbook. When I am looking for a job, I need help from anywhere. LinkedIn does a good job of “referral”. But the same concept can be extended to Email, Facebook etc. Job-boards should be able to find which people can refer to me in a company based on my email connections and facebook connections.

5. Preemptive recommendation:  Job-boards should reach out to users who are currently “employed” and are “not actively looking” with suggestive new positions that enhances their career growth. This is different from simple email that currently companies do. They should be like online “career consultants” who keep track of my career and give me timely suggestions about what skills I should acquire to grow in next few months.

ciao~

Understanding growth and opportunities

Often we hear about industries / locations growing at a torrid speed and how young entrepreneurs could benefit from that. Its true that growing markets provide good opportunities, but its crucial to understand what the growth “really” means. And equally important is to identify the core competency that the companies should develop in order to enter the market and strengthen their positions.

Some notes:

1. Competition: Growth, often, comes with a fierce competition among new comers who want to tap it and become the leaders. Analyzing how the competitors are positioning themselves would provide a good look at how your company’s strategy should look like.

2. Customers: Most often, it is advisable to position yourself “closer” to the end customers. Of course before you do that, you should first find out who your actual customers are. Understanding how customers could benefit your products, and then tweaking your message accordingly is one key marketing process that should not be neglected.

3. Target Industry: It is important to find out what “part” of the industry is actually growing. Typically, most companies jump onto the bandwagon without realizing that the growth of Industry does not necessarily mean that all “niches” or all “associated industries” would also grow. Remember, your “niche” is your “whole” industry. It may be different from the “industry” as described by the analysts. Let me cite an example: If the retail industry is growing at 5%, it does not mean that “all” retail segments are growing at 5%. Identify what part of retail you belong to…and how fast that segment is growing. More you segment it, better picture you will be able to see.

4. Growth Life: Understand the cyclic nature of the industry/business you want to venture into. Every industry has a cycle and understanding this cycle will enable companies from misunderstanding a temporary uplift vs the permanent (or long term) growth.

5. Alignment: Identify how your core competency fits into the industry to tap its growth opportunity. Remember, do not jump into industries with higher growth because they look “sexy”. Aligning your core competency with the industry’s requirement is essential for success.

6. Adaptability: Understand what your business does and what your core competencies are. Many businesses do not understand what business they are in. This stops them from swiftly adapting to new Industry success factors. Be nimble and flexible to adapt to changing market dynamics. Eg: Big companies tend to loose sight of this and end up loosing business. Examples include Borders vs Amazon, Blockbuster vs Netflix.

ciao~

Next innovation in Group buying

Groupon is the undisputed king of group buying wave that has hit the internet recently. A lot o clones have popped up, including some aggregators, and I was thinking about some additional “group buying” ideas.

Lets do a quick SWOT analysis for Groupon:

Strengths: Brand, First-mover-advantage, Good financial backing, scale, good customer satisfaction

Weakness: Low barriers to entry, Low switching cost for users, Limited revenue (1 sale/day/city)

Opportunities: Build barriers to Entry, Make Groups, Develop features to increase the switching cost, Diversify into commenting (like Yelp), Diversify into Local advertising (or branding)

Threats: Multiple competitors, Niche competitors, Yelp could be a competitor (with groupon type feature), Expansion beyond a threshhold is not scalable

I am looking at opportunities, and it leads me to think about a new product/website/feature:

1. Let people start making groups around local businesses

2. If the group reaches a limit, then the local business gives discount (50%)

3. It will be time bound-as well as-number bound (maximum 50)

4. Multiple groups can be formed at the same time.

So, this will be a pull-based mechanism rather than groupon’s push-based sale. It could be quickly implemented as a Facebook app. Lets see how people react to this.

What do you think about this product? If interested, then let me know if you want to discuss more about it. There are some other salient features that will make it a compelling product.

ciao~

Yahoo and its comeback

Yahoo is good at generating Content. In 90s it was a very good core competence to have but after the onset of social media (esp. blogs), generating content has become a commodity. Anyone can generate content…and thanks to Google and Twitter, this content can be searched/distributed by anyone across the globe. People do not have to go to big brands (like Yahoo) to find good content.

In this context, Yahoo’s core competence became irrelevant. It tried Search..then it tried Digg style ranking, and now a days it is trying to be social (with yahoo connect). My thoughts: For a company that is as big as Yahoo..these strategies will not be helpful. Remember…you can not beat them at their own games. What Yahoo needs to do is…play its own game and let people compete with it on its own turf. In business language: Develop a new core competence.

There is a general notion that “social/connection” is important. No doubt it is…but it is only as important as the content that is shared between the connections. So, in a view, “content” is more important than the “social”. Yahoo has a lot of content (its strength). What it needs to do is to find out a way so that the content can “connect” with the user. A lot of pattern learning, profile learning, and behavior analysis will be required for this. . To cite an example: Let us imagine a scenario where you go to the Yahoo site..and find stories breaking out (just like Twitter) that are very relevant to you. Will you not go to Yahoo again and again to see that? I will. And the best thing is that Yahoo has the resources to do that (another strength)

Yahoo, are you listening? I will love you for ever, if you are able to do that.

ciao~