TBC Indoor Kart Racing
Sean Campbell sold more than 12,000 coupons in a single go for his go-kart business through Groupon.
Groupon brings a 12,000-coupon avalanche of business to Richmond's TBC Indoor Kart Racing with its collective buying model.
Near midnight on Aug. 26, long after most of his 25 employees had gone home for the day, Sean Campbell was glued to a computer screen in his Richmond office, corkscrew in hand, ready to celebrate.
In a bid to boost post-recession sales, the general manager of TBC Indoor Kart Racing had taken a gamble on the latest Internet marketing strategy: the group coupon. Delivered daily to subscribers’ inboxes and offered by a crowded field of online companies, group coupons promise buyers hard-to-believe price breaks at local businesses: half-off sushi dinners, $100 haircuts for $30 or, in the case of TBC, half-price go-kart races at two for $12. As the final minutes of the day-long promotion wound down, Campbell tracked the coupon sales online. “My assistant and I sat in our office at 11:30 at night with a glass of wine in our hands,” he says. “We were selling 150 every 10 minutes. It was insane.”
Campbell offered his deal through Groupon, the Internet coupon pioneer. Groupon’s innovation, copied by hundreds of knock-off sites, is its collective buying model: deals only become active once a preset number of people buy in, allowing merchants to offer serious discounts secure in the knowledge that it will drive significant traffic to their business.
Groupon Vancouver launched in April last year and already counts 340,000 subscribers. Among the 380 local merchants who have advertised on the site, many have reported spectacular results, though none has been more dramatic than TBC’s. When the smoke finally cleared, 12,692 coupons had been sold, a Vancouver record.
The Groupon model resolves two challenges associated with traditional advertising channels, including print, TV and radio: the cost of advertising and ensuring that messages reach interested consumers. With e-coupons, merchants pay no upfront cost for advertising, and only people who have signed up receive coupons. But these benefits come at a cost. Groupon and similar services generally charge a 50-per-cent commission on all coupon sales, so business owners end up taking home only half of an already deeply discounted sale price.
“It’s not a revenue generator at all,” Campbell explains. “I like to think of it more as a marketing tool.” In his case, the promotion did translate into long-term gains. Following its August coupon distribution, TBC’s fourth-quarter revenue was the best in the company’s 10-year history. While a lot of that revenue came from consumers redeeming coupons, group bookings at TBC – which were not part of the promotion – were up nearly 50 per cent, a surge Campbell attributes to Groupon. “It’s all too coincidental to be just luck of the draw,” he says.
Results are rarely so dramatic, especially with coupons issued by Groupon’s myriad smaller competitors, including dozens of sites offering discounts in Canadian cities. SwarmJam, a Postmedia Network company, for example, was launched nationally in December last year and has since sold 15,000 coupons in cities across Canada, including Vancouver.
Amber van den Hoven, owner of the four-month-old Babydoll Boutique lingerie shop in Maple Ridge, issued a half-off voucher through SwarmJam, as well as several other group coupon websites, in January. “As I’m new, I’m trying to get as many people in here as possible with the lowest cost to me,” van den Hoven says. Factoring in the steep discount and SwarmJam’s share of the kitty, she would end up with only 25 per cent of the original retail price of her merchandise when customers used the coupon.
Ultimately, only 21 Babydoll coupons sold, enough to activate the deal but hardly the avalanche van den Hoven feared. Each coupon “is one more person through my door,” she says. “Then the real work of wowing them starts, to keep them coming back.”