Coaxing Shoppers of a Feather to Flock Together
The blue light special is back—with a social media twist—at Groupon, LivingSocial, and BuyWithMe, a new breed of e-tailer that uses collective buying power to get steep discounts from local merchants. Retailers in New York, Chicago, Atlanta, and other cities are signing up with the sites to offer discounts of up to 90% on items. The catch: Each markdown is activated only after a number of consumers commit to purchasing. The stores set that threshold, sending those who buy online a printable coupon to bring to the store.
To create a sense of urgency, the sites put up limited-time offers daily, using Twitter and e-mail to stoke demand among their members. "They've stumbled on a value proposition that's appealing," says Sucharita Mulpuru, an analyst at Forrester Research (FORR). Groupon, with 1.5 million members, is the most popular of the new services. After launching in Chicago a year ago, it has expanded to 45 cities. By now it has sold 855,000 items, it claims, at a collective discount of $37 million.
For merchants, the appeal of such sites is straightforward. In October, Balani Custom Clothiers, a small Chicago outlet, offered a $225 gift certificate for $95 on Groupon. The site sold 850 of them that day, a number equal to the customers Balani would attract in a year and a half, says shop owner Sonny Balani. "We're slammed now," he says. "That is to say, happily busy."
Such group shopping may be a bright spot in what's expected to be a somber holiday season, online and off. Web tracker ComScore (SCOR) expects 3% growth in online sales this holiday season. That's better than last year's 3% decline but anemic compared with the 22% average growth of the three prior years.
Andrew Mason, Groupon's founder, expects his sales to top $100 million in the next year. The question (think eBay): Will this latest twist on e-commerce fade once the novelty wears off?
When Bosses Aren't Ready
How key is a good boss? A new study suggests a decline in qualified managers is detectable in productivity figures. Using "a bit of theory and a bit of data," Dartmouth economics professor James Feyrer looked anew at the drop in productivity growth from the 1970s to the mid-1990s—a time when U.S. output per hour grew roughly 1.5% a year, vs. 3% in the 1960s (and now). One idea about the falloff is that it coincided with a flood of novice employees, as baby boomers went to work. Believing this alone wouldn't explain it, Feyrer searched for a "spillover effect"—and found it in management. Census data from the period showed a rise in workers classified as managers and a dip in managers' median age—from 43 in 1970 to 38 by 1980. Feyrer hypothesizes that the need for more managers, given the boomer influx, had businesses tapping some who weren't ready. Managers' median age was back up by 2000 (to 42), he notes, along with productivity growth. The "management effect," he says, accounts for about 20% of the observed slowdown.
Animal Rights in the City of Lights
In their campaign to ban foie gras, European animal-rights groups are bringing their fight to France, which accounts for 75% of the liver delicacy's global output. Activists plan a rally in Paris on Dec. 12 to urge their countrymen to forgo foie gras, a popular item at holiday feasts. On Nov. 27 two of the groups released a survey by pollster CSA that found 44% of the French favored a ban on traditional foie gras production, which involves force-feeding ducks and geese to enlarge their livers to at least four times normal size. "We were pleasantly surprised" by the poll's results, says a spokeswoman for one group, L214, which takes its name from a French law on treatment of animals.
British department store group Selfridges recently agreed to stop selling foie gras after being targeted by protests led by former James Bond actor Roger Moore, who has called foie gras "torture in a tin." Netherlands activists have pressured such hotel groups as Mövenpick and Carlton to stop serving the delicacy at Dutch locations. But in France, where foie gras is a $2.5 billion business, such groups face an uphill battle. The French eat 18,500 tons a year. And while 63% of those polled agreed force-feeding was "a source of suffering," only 19% said they'd refuse to buy foie gras.