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The Key to Strong Sales in a Tough Economy

The key to a successful start-up is finding out what people want. Where is the demand? What do people really need?

Courtesy of Monster Savings

During the recession it was easy to say — Nothing! Forget it! This is no time to start a business. People want to save money not spend it.

But that right there was the answer: People want to save money.

New York City restaurant owner Michael Eberstadt took a huge hit in the past few years from rising commodity prices. Eberstadt, who owns Rack & Soul, said ribs used to cost $2.50 a pound, now they’re $3.64. That’s an extra $50,000 to $60,000 a year — just for ribs.

To try to save some money, he started driving to warehouse grocery chain Costco . Friends who live in New York would ask him to pick up a few things. All of a sudden he realized that was a solid business model — helping people in an expensive city like New York save money.

So, he started Monster Savings, a company that picks up grocery and other items from Costco and delivers it to consumers and small businesses in Manhattan.

“It’s a standard question: Do you have something to offer that people are going to want?” Eberstadt said. “People want service — and they want savings.”

He did some research to find out what the average cost of these items would be in a New York City grocery store, compared that to Costco prices and split the difference. So, if it’s usually $30 in New York and $20 at Costco, he charges you $25. No delivery free — just splitting the savings.

Customers order what they want from the Monster Savings website and pay for it. Costco opens early for them and Monster drivers head in before the other customers arrive and picks up the order, which Costco already has ready. Then they deliver it to the customer’s doorstep.

His customers include a lot of Silicon Alley businesses including Gilt, Buzzfeed and Business Insider — and, of course, his own restaurant.

Monster’s revenue has more than quadrupled since the company started three years ago — just as the recession was getting underway.

Capitalizing on demand for savings can be very lucrative. Just look at Costco’s report this week that its same-store sales jumped 10 percent in July from a year ago.

Or look at Groupon, a daily deals website. Buzzfeed offered to buy the company last year for $6 billion but some say with its upcoming IPO, it could be worth as much as $30 billion.

And this isn’t a US-only trend: Given all the global economic uncertainty, daily deals sites are thriving all across the globe. Google just bought Dealmap and LivingSocial just bought South Korean daily deals site TicketMonster.

The deals business is so hot that there are sites like DealsGoRound that aggregate daily deals from places like Groupon and LivingSocial.

You just have to find out what people want. And right now, what they want is to save money. Or, as Eberstadt puts it — Monster Savings.

Questions? Comments? Email ponyblog@cnbc.com or drop a line in the comment box below.

More from The Pony Blog: ponyblog.cnbc.com

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