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E-Commerce Site Boosts Small Business

Thursday, 19 Aug 2010 | 3:52 PM ET
Groupon.com
Source: groupon.com
Groupon.com

Much has been said and written recently about how to jump-start small businesses in the US, but the wildly popular e-commerce site Groupon seems to doing just that while giving consumers exactly what they want—discounts.

“We’re the first people who have really figured out how a small business can do advertising and see huge results without paying upfront,” Groupon CEO Andrew Mason told CNBC Thursday.

“These businesses have very small marketing budgets, and they only have to pay when the customer comes in the door in the form of a discount. So everyone ends up winning.”

The two-year old Groupon, run by 29-year-old Mason, offers local businesses (small and big) free advertising through a discount coupon-redemption business model.

Consumers have embraced theChicago-based Groupon and the concept since its launch: It has 13 million members worldwide in 29 countries.

The nitty-gritty is that Groupon features one new deal daily—a price reduction on goods or services—by a fixed deadline. Among those offerings are discounts on clothing, health services, such as acupuncture, meals at restaurants and different kinds of entertainment.

"“We’re the first people who have really figured out how a small business can do advertising and see huge results without paying upfront.”" -Groupon CEO, Andrew Mason

For example, throughout the country Thursday, Groupon members were offered a 50 percent discount at the Gap, paying only $25 for $50 worth of merchandise.

Forbes, which recently featured Mason in a cover story, called Groupon the fastest growing company ever—surpassing such runaway successes as Google and Amazon . The magazine estimated the privately-held company’s valuation at $1.35 billion.

Groupon: Fastest Growing Company Ever?
Group discount company Groupon has made an estimated $500 million in revenue this year alone. Andrew Mason, founder of this young company, talks to CNBC about its growth.

This year, Groupon raised $135 million, mainly from Digital Sky Technology, the Russia-based Internet holding company, which has also invested in Facebook.

Mason acknowledged that copycats of Groupon abound—some 500, he said, since the site launched.

He said that Groupon works to distinguish itself from competitors by launching new services, such as capacity planning for businesses. This type of planning helps prevent the retailers, especially the smaller ones, from overselling more than they have in inventory or can provide in services.

Another feature, added two weeks ago, said Mason, tailors the member’s offerings to his or her preferences, which the site monitors by noting which types of coupons have been selected previously.

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