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New York, Chicago, LA, SF, and Boston are heading the Group Buying charge for good reason — there’s variety in cuisine, services, and attractions in order to sustain a different, premium daily deal.
I wanted to see which cities are the hottest based on sales and predict where we’ll see the biggest growth. Until recently, it would have been impossible to have an apples to apples comparison of deals in each city — some pizzerias are just better than others, e.g. Grimaldi’s versus Famous Rays, so we can’t compare intra-city, and who wouldn’t agree that NYC pizza is better than Chicago’s, so inter-city pizza deal comparisons are also out the window.
However, The Gap recently ran a national Groupon deal, allowing me to compare city vs. city. I emailed Groupon for the statistics of their Gap campaign, but they didn’t answer me fully back yet (only that there were 440,000 in total). So I went to their website and checked the Gap deal for every city, replacing each city name, one by one. The result is a list of cities by Gap deals sold (by “GAP rank”).
Gap Rank shows the most accurate traction statistic for group buying: Groupon sells thousands of deals more than its competitors combined, this was a national campaign, and the same product was sold in every market on the same day. Moreover, it’s something my mom would buy, or Oprah would recommend — so it passes the mom test!
We have to adjust for relative size — NYC is 8 times the size of Salt Lake, so it should sell 8x the deals. So I ranked by GAP deals per capita (“Gap / Population Rank”).
The other factor to consider is relative affluence (after all, these are deals for spa treatments, not doctor visits). I measured the growth potential for each city by affluence based on ranking GDP per capita (by population). I realized that some cities were penalized for a lower population, even though they had great traction (for example, Washington DC which has a 25th ranked population but was the 1st ranked city for GDP/Capita — and 5th overall for deals sold!). Ranking by GDP per Capita fixes that problem.
The score (column G) is a measure of the likelihood that the people of a city will buy group deals based on traction (GAP / Capita) and how wealthy they are (GDP / Capita), but this score omits the significance that Groupon is a viral beast — network effects further fuel the fire. The absolute number of total deals sold is significant - it represents the number of people in the city who will go off and tell their friends about their awesome deal at the Gap. So, taking a weighted average of each variable including the total number of GAP deals sold is the most accurate score for growth of top cities:
Weighted Score= (1/3 rank GDP/CAP) + (1/3 rank Total Deals) + (1/3 rank GAP/CAP)
Therefore, the Top US cities for deal growth are (in order):
Washington, Boston, Minneapolis, Atlanta, San Francisco, Seattle, St. Louis, Denver, Chicago, Dallas (Fort Worth), Salt Lake City, Cincinnati, Portland, Pittsburgh, Kansas City, Orlando, Raleigh (Durham/Chapel Hill), Hartford, Providence, Tampa, Cleveland, Baltimore, Philadelphia, New York, San Jose
A deal aggregator should target cities based not where the most number of deal service providers are, but where they’re going to be — cities with traction and people who are going to buy them (so stay away from Phoenix, Houston, and San Antonio in the next 6 months to 1 year, despite population size). So go after the cities with the highest weighted average score (mentioned above).
In terms of choosing cities based on deal services, there are currently estimates of 150 Groupon Clones — with such low barriers to entry, it’s really difficult to know of (be aware of) each Deal provider in every city. They’re popping up left and right, and with Group Buying really getting hot in the summer, I expect a bunch of deals in other verticals to start popping up in the fall, specifically on college campuses (CampusDibs.com). These are places where populations can change dramatically (think Game Day at Penn State when 100,000+ people come to see a football game) and could take flash-mob deals to a whole new level. Look out for daily deals on campus at schools with large student bodies and a vibrant college town: OSU, Arizona State, Florida, Minnesota, UT Austin, Michigan State, Penn State, but remember, size isn’t everything, right Washington, D.C.?
Groupon clones should hit the streets in the cities with the lowest weighted score. The cities are familiar with Groupon deals, but Groupon doesn’t have a strong hold since 2/3 of the weighted score is based on deal flow. These cities are: Albuquerque, Memphis, San Antonio, Louisville, New Orleans, Las Vegas, Ok. City, Omaha, Madison, Milwaukee, and Phoenix.
Read more: http://www.businessinsider.com/where-should-your-groupon-clone-go-2010-8#ixzz0ySfqCnDp