Online deals become multi-million dollar business
What do you get when you mix discount coupons, social media chat and consumers looking for a deal? You get a multi-million dollar business that's exploding.
Is it a fad or a profound shift in advertising?
For Chef Michael Blackie at Le Café restaurant at the National Arts Centre it's been a big education lesson.
A few weeks ago he took the plunge and offered a two-for-one discount coupon for Sunday brunch. When the offer was over, nearly 3,000 people had bought in. That's 6,000 new customers.
"The Friday morning when the offer started I got up at around 8:30, by 9:30 a.m., we were already at 400. The velocity is so incredible. I was expecting maybe 800. I was shocked by what happened," said Blackie.
He expects a lot of repeat business to be generated and sometimes that kind of boost to business can swamp a small firm that is not ready for it.
There are plenty of online deal options: Koopon, Kahoot, Red Flag, WagJag – Facebook is even getting into it.
Groupon is the leader with more than 70 million users in 45 countries. The company turned down a $6 billion offer from Google and is now preparing to go public in the United States.
"I think what Google was looking at, was getting into this business quickly and then riding it very hard," said Eric Johnson, a business professor at the Tuft School of Business.
The founder of Kahoot.ca is in Ottawa. The company launched just six months ago, and 70,000 people are already signed up.
"We've got to the point where there is a waiting list of clients who are constantly asking me: ‘When are we going to be on?' And sometimes it's up to a month," said founder Ryan Wilby.
Each offer has the same format: what can you get; how long the offer will be available; and how many people are needed to buy into the deal for it's a go.
If consumers talk the deal up on Twitter and Facebook, it can help generate the minimum tally of buyers.
Many consumers have become big fans. Some have heard about the online deals or signed up, but are yet to purchase anything. Others are still unsure of how it works.
Ottawa's Olivier Simart, who launched Koopon.ca about six months ago, says he believes people aren't really grabbing the opportunity.
"No not really. Some are now aware of it or their friends tell them: ‘Have you heard of this offer on this site?' But they are slow to respond," he said.
So, will this be a fad that burns out like online auction sites? Will it settle down to something less dramatic? Or, will the simplicity of email, coupons, social media and discounts have real staying power?
Regardless, Blackie says he'll try it again.
"Now that I know how it works, the slate is clean and I will be doing some negotiations on how much commission I pay. All the sites have been calling me since our big success," he said.
With a report from CTV Ottawa's Paul Brent