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E-commerce Startup Shows Not All 'Groupons' Are Created Equal

  |  October 21, 2010   |  Comments

Soap.com's tests on Groupon reveal that online retailers have advantages over offline marketers for getting the most out of loss-leaders.

Soap.com is providing an intriguing example of whether Groupon can help successfully launch a national brand. And it is showing that e-commerce firms can gain potentially valuable e-mail addresses for their Groupon loss-leaders much easier than brick-and-mortar retailers.

soapgrouponThe three-month-old household products website has run an offer on Groupon in 10 cities around the country during the last four weeks, with an emphasis on  the New York City metropolitan area. Part of the Jersey City, NJ-based Quidsi, which owns Diapers.com, Soap.com has already tested Manhattan, Brooklyn, Queens, Long Island, and northern New Jersey with a $20-voucher-for-$10 offer.

According to Sumaiya Balbale, associate director of marketing for the retail startup, those one-day efforts have resulted in 16,500 purchases. Though, Balbale said questions about loss leader vs. profitability will remain until the voucher redemptions expire in a couple of months.

"In some markets around the country, we see customers sticking to that $20 amount - maybe getting up to $25," she said. "In other markets, people are spending a little bit more. We are getting mixed data right now in terms of that specific metric."

From Gap to small businesses, marketers testing Groupon campaigns have sometimes been absorbing losses with the discounted vouchers. Brick-and-mortar businesses interested in driving foot traffic for a profit hope that voucher buyers spend more than the purchased amount to make up for the loss-leader. Indeed, droves of "Groupons" redeemed at only the voucher value can spell a big loss for a company. Rather than suffer a financial loss, such local businesses - with marginal branding aspirations - would likely prefer that the "Groupons" purchased are not redeemed in-store at all.

But Balbale and her e-commerce team cautiously want to garner all the redemptions they can get. So far, so good.

"Groupon was shocked at the next-day redemptions that we have received so far," she said. "We blew [projections] out of the water. We didn't expect to see such an immediate response. I think it is because we are an e-commerce retailer that sells everyday basic goods. And we offer fast and free shipping. So the buyers can get an immediate gratification from this 'Groupon' without having a reason to wait."

E-mail Addresses Can Add Value to Groupon Loss-Leaders

Soap.com's high redemption rate also underscores a pair of key advantages an e-commerce site may have over offline retailers when it comes to maximizing a loss-leader's longer-term marketing value. First, e-commerce-based voucher redeemers have to type in an e-mail address to complete that purchase. Therefore, new customers attained via Groupon can be re-approached by the brand with other e-mailed offers, effectively eliminating the "one-purchase-and-gone" scenario that keeps some Groupon marketers sleepless at night. Secondly, future e-mail offers can be targeted by the purchase data attached to the captured addresses.

Conversely, to get the same data, a brick-and-mortar marketer would have to accurately collect e-mail addresses from the voucher redeemers coming into a store and then log what they purchased.

At any rate, in the case of Soap.com, it now has e-mail addresses and purchase history data from 16,500 customers in the New York area alone. Those customers were accrued with offers that ran on only two days, Sept. 22 and Oct. 16. Not to mention the customers/e-mail addresses it's picked up from Groupon offers during the last few weeks in Los Angeles, Atlanta, Seattle, San Francisco, Minneapolis, Boston, and Chicago.

Balbale said the brand will also test offers in Houston, Dallas, Washington, DC, and Miami in the next two weeks. Overall, she said Soap.com is targeting metro areas where consumers will be attracted to the brand's 1-to-2-day free shipping offer for orders exceeding $25. (Complimentary same-day delivery is available for Manhattan, NY.)

"We're trying to cherry-pick markets where we can have better results from a return-customer perspective," Balbale explained. "I don't think we would do 'Groupons' in Oklahoma or other more remote markets where it's likely a person will purchase just once because they live within driving distance of a Target or Wal-Mart."

Whether or not the combination of sales, e-mail addresses/purchase data, and brand awareness provided by the Groupon stints will justify the loss-leaders for Soap.com remains to be seen, the associate marketing director admits. Balbale echoed some of the concerns of other Groupon marketers who have explored the channel.

"From an offer and a return-visitor perspective, I think the verdict is still out," she said. "It's only been a few weeks. On average, we do not see repeat customers for three to four weeks. It will be interesting to see if they are here and gone with the offer… or are they going to come back? But from an awareness and buzz-building perspective, we've already seen results that we like."

Interestingly, Balbale said all metropolitan markets may not be created equally for Groupon efforts.

"New York might be a really great market, and Dallas might not be, in terms of repeat visitors," she said. "It might be because some markets are better than others for our specific brand. Or, the results may have to do with the Groupon vehicle itself. We do not really know yet. We are trying to accomplish multiple things with this. We are testing to see where the good customers are."

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ABOUT THE AUTHOR

Christopher Heine

Christopher Heine was a senior writer for ClickZ through June 2012. He covered social media, sports/entertainment marketing, retail, and more. Heine's work has also appeared via Mashable, Brandweek, DM News, MarketingSherpa, and other tech- and ad-centric publications. USA Today, Bloomberg Radio, and The Los Angeles Times have cited him as an expert journalist.

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