What Do Groupon Clones Look Like? A Mother Lode of Niches.
With Groupon’s and LivingSocial’s success at securing hundreds of millions of dollars in financing and achieving hyper revenue growth, who wouldn’t want to copy their business models?
To be sure, there’s no shortage of clones.
In an industry that is only a year-or-so old, the trend of the past five minutes (or so it seems) is to target a small segment of Groupon’s and LivingSocial’s audience, with an emphasis on families and mothers, who tend to get the credit for being the decision makers of the household.
Today, San Francisco-based Plum District, a daily deal service devoted “to savvy moms and their families,” has raised $8.5 million in a first round of funding from Kleiner Perkins Caufield & Byers. General Catalyst Partners also participated.
Beyond the generalists, like Groupon, LivingSocial and smaller companies like Tippr and BuyWithMe, there’s a deal site sprouting up devoted to a specific niche almost every day of the week.
Los Angeles-based FamilyFinds launched a daily deal site in December. The company’s co-founder and president, Brian Barnum, said: “We call the mom the Chief Purchasing Officer for the home….The family vertical is attractive. They tend to be very local.”
The company purchased a small competitor from Chicago to operate FamilyFinds Chicago. It’s already up to 18 employees and has raised $5.75 million in venture capital to help expand to 10 to 20 markets in the next year or so.
On the other side of the country is Wakefield, Mass.-based Eversave, which is part of an 11-year-old online marketing company. Over the past year, it has transitioned from helping big brands, like Kraft and Proctor & Gamble, create online relationships with customers through email and other means.
It’s now offering daily deals on its own, and targeting females ages 25 to 55. It serves 57 markets as part of its bigger online marketing business, and plans to have local deals in up to 15 markets by the end of the quarter. CEO Jere Doyle, said: “We turn down a lot of deals that are younger, or male-oriented. We are looking at the soccer mom. It’s not as urban; we are a surburban play.”
Doyle said there will likely be a shakeout in the broader deals market, with some companies getting purchased and others going out of business, but with room still for successful niches.
“There will be some consolidation. There always is in a booming market, and then you’ll see people focused on niches,” he said. “We are looking at the female audience, but there will be others focused on the inner city, or food or travel. It feels like if you can get a niche under your belt, there’s lots of room to be successful.”
Of course, even in these market niches, companies approach the business differently.
For example, because of Eversave’s marketing background, it’s focused on helping retailers with follow-up campaigns to turn deal seekers into returning customers.
Likewise, Plum District, which is in more than 20 metro areas in the U.S., is trying to differentiate itself by how it sources local deals.
Plum District has a “multi-level marketing sales approach,” meaning that the same moms who are receiving the deals can also act as its sales force (a la Mary Kay). Local moms source deals in their own cities and neighborhoods to find bargains on groceries, family outings, children’s classes, restaurants, spa treatments, fashion and travel. They also help drive awareness of the site by discussing it among their offline network of friends and affiliations.
The incentive for getting good deals is making money. For example, the top Plum District sales mom (which the company calls a “district consultant”) for Newport Beach, serving Orange County, is projected to make six figures if her earnings are annualized.
Plum District said the new funding will allow it to expand into Portland, Dallas and Raleigh-Durham in the coming year. It has also secured serious national interest from Best Buy’s Geek Squad, Drugstore.com and eBags.com, which will provide deals in the coming weeks.