Hey Ilene, nice post! A couple things stood about the operating model stood out to me:
1) Consumer Behavior: Women must like to shop more by inspiration and less by necessity. For guys, I feel this paradigm is the opposite. We go in to shop with a particular need (my jeans tore therefore I need new ones, etc.). Ghalichi’s implementation aligns very nicely with this assumption of how women shop. There’s also a fantastic baked-in upsell component where even if the top was what caught the user’s eye, she is tempted to purchase the bottoms and shoes as well to complete the look. I’d be curious to compare average transaction size on a site like wantmylook vs. more traditional merchandizing models.
2) Centralized vs. Crowdsourced Curation: Undoubtedly, the looks put together by professional socialites such as Ghalichi and the Kardashians are great, but I wonder how a centralized approach to curation compares against a crowdsourced model (a-la Pinterest where everyone can be creative and put forth their outfits). Which ecosystem would you rather be a part of and why?
3) Revenue Model: Is wantmylook simply an affiliate driving traffic to retailers of the various clothes, or do they stock/sell the clothes on their own? Was unclear to me from looking through their website. Most affiliate models like Pinterest simply link users out to the end-destination sites to complete checkout and take a cut of the transaction.
4) Does the look make the person, or does the person make the look? I’ve always wondered this about fashion. My instinct says the person makes the look. In my opinion, a gorgeous woman can quite frankly wear anything and still look great! If you traverse all the way up to the root of the innovation chain where some designer is designing clothes for the Kim Kardashians of the world, how does this designer actually measure intrinsic success of her work if pretty much everything her client wears turns to gold in the media? Downstream, are there cases of buyer’s remorse where women are disappointed the dress they buy just doesn’t look good on them?
Hey David, great question. I think what Groupon ideally strives for is not just sending the right merchants to customers but also sending the right customers to the merchants. The key to this is being able to stratify incoming merchants along their needs: customer acquisition, loyalty, spend/visit growth, and yield management and having the data on customers to know which customers would best align with the merchant’s goal. So, for a brand new merchant who just wants customers at any cost, we blast a high discount, mass-reach groupon. For a successful merchant who simply needs to fill in some slow times, the Groupon would be for smaller discount and restricted times.
Hey Anjali, thanks for the great comment! I totally agree with you that Groupon lost its local roots as it expanded. My team experimented with going back to some earlier concepts like expiring deal of the day, tipping point, etc., but ultimately as I was saying to TJ in his comment, demand generation is a smaller market than demand fulfillment. Groupon wants to serve whatever local need you might have–be it a restaurant, spa, salon, housecleaners, local concerts, etc. Going back on the marketplace vision would be a no-go in my opinion.
As for the brand, “tarnished” is a little harsh. I think Groupon certainly struggles to attract high-quality merchants to the platform because of brand, first and foremost.
Great post Michelle! Any idea what the COGS are for a simple razor blade? How in the world can Gillette and others maintain what I presume to be high margins? Also, any idea on the electric shaver vs. manual market? Do we see consumers shifting to electric?
Also curious–how has Warby Parker done with its hybrid model? If they have turned a profit, what are the reasons they have been successful while Bonobos hasn’t yet?
Nice post, Akeel! The guideshop model is quite interesting. While I’m sure they boost the confidence of users on the fence about buying online, I think the company is getting away from its core competency. As your post mentions at the beginning, Bonobos was a product innovation. They made trendy pants that fit normal people (not super skinny, not baggy grandpa khakis). The function of having sales associates assist customers in finding what size they should buy is generic. Any retail store can do that. Perhaps male customers don’t even need all the employee attention. They just need to try the clothes on for themselves and see if they fit. These shops put heavy cost pressure on Bonobos. I question if it’s the right strategy compared to just focusing on product and distributing through normal means.
Nice post, Brian! Along the lines of Claire’s comment, I’m wondering what the investment community thinks of models like Sweetgreen’s. There seems to be tension between delivering on the promise of the founders’ vision and scaling the business. What can Sweetgreen do to expand more quickly while not losing much of their quality/brand?
Hey Aldo, thanks for the comment. I see four keys to good marketplace design: selection, price, information, and convenience. If Groupon does the stuff above, I think they’ll be in good shape.
1) Core Product
a) Acquire more merchants (including more high quality merchants)
b) Invest in user reviews and publish on site
c) Remove awkwardness in redeeming a Groupon
d) Build compelling search experience and pull distribution channel
2) International business: Improve efficiency of operations and restore profitability
3) Future Product: Invest in beacons and POS technology to tap into merchant transactions data.
Dallin, thanks for the great question! I think the founders didn’t really anticipate how radically different a scaled-up Groupon would be from baby-Groupon. Groupon grew so quickly as a company and went public so early, it was hard to really think through how the marketplace vision would work. I don’t think they wanted to be limited in scale, but I think they thought they could transition to the marketplace later. They underestimated the difficulty of building out pull distribution and overestimated how much time they could rely on email as a channel. I still think Groupon can make the marketplace vision happen. I see four keys to good marketplace design: selection, price, information, and convenience. Groupon needs to invest in user reviews, acquire more merchants, drop the 40-80% discounts to more reasonable or perhaps even 0% discounts for the good merchants, and remove the awkwardness around redeeming a Groupon.
Russ, thanks for the great comment! Agree with you that there is always some cannibalization risk for merchants with running a Groupon. But, I think the push business has a clear ceiling. Demand generation is naturally a smaller business than demand fulfillment (i.e. there’s only so much you can trick people into buying stuff they didn’t realize they wanted :)) I still think the pull business can pan out for Groupon. They’ll need to lax on the “discount” being a core part of the consumer value proposition. If you imagine an AdWords-esque world where discounts are set by the marketplace, high quality merchants can set discounts just during their off-peak times as you mentioned or even charge a premium for high-demand slots.
As an aside, Groupon has a surprising amount of user review data (especially internationally where the numbers dwarf Yelp’s). They can definitely make a move into “Discover” and steal of some Yelp’s thunder there. Another plus point with Groupon’s reviews is they come from verified redemptions at the merchant, so this eliminates the authenticity problem Yelp sometimes has.
Good luck at Utah tonight!