In the Gap family, the Old Navy brand often takes the advertising prize for its inventive commercials hyping up its bargain-priced fare. When it comes to experimental media, the Gap has the more experimental and forward testing marketing team.
Until August 22, 2010 Gap has underway a test with Foursquare. Check-in to any Gap, and you will receive a 25% discount on your purchases. Let's say you didn't know about the sale, and were doing a search for Gap. Here is what you'd see.
Click on a location, and you will see the details of the special offer.
I am huge fan of the fourquare business. Perhaps, better said, I am huge fan of the business that fourquare will become. Much of that has to do with having seen one the company's co-founders speak at a conference. (Thanks again @dens). Not being an avid enough user of the application, I only found out about the deal through a friend. Many probably found out about it through other online sources such as Mashable who covered the launch of the promotion or perhaps by checking-in near by and noticing that another venue, in this case the Gap, had a special offer.
Members of Groupon would have learned about the Gap deal had they checked their inbox. Groupon popularized the local daily deal and has revolutionized local lead gen. The initial business model revolved around the group coupon with deals "tipping", i.e., becoming active once a certain number of people participated. It's the opposite of scarcity tapping into social proof instead. Deals still tip, but the anticipation of them tipping has waned given instead of being if, it's now how fast.
So how well did each do? With foursquare, we don't, but the answer is most likely, average. If we were to assume that the venue page showed check-ins for just today, then the numbers could be interesting, as my back of the envelope tally puts us at just about a thousand. That, though, is presumably not how the stats work, especially since most stores have just opened. No fault to foursquare. That is not how the system is designed. The Gap is not a social experience. It's check-ins will be low. The coffee shop down the street has 15x the number of check-ins that the Gap near it does.
Groupon on the other hand is not a platform based on social discovery. It's a commerce platform. You don't need friends to enjoy the experience. For me, the fun part of the buying process is the guilty pleasure from seeing how many others purchased. So I clicked on the email and got this:
The site continues to tease us with being occasionally online. During one such viewing, I looked for the running tally. For the first time since I can recall, the site won't say. It merely says, "tipped when thousands purchased." It could be a Gap requirement, or it could be giving away too much information about the company to competitors. If I had to venture a guess, I would put it at ten times more popular than a typically popular deal. Were we to find out that 12,000 or even 15,000 purchased. I wouldn't be surprised. And, that's just one metro area. Back to school is good, but just imagine this deal during Christmas time.
Tempting as it is to do similar big box branded deals, I think Groupon will lose out one of its key benefits if they do so too frequently. That being said, the runway is enormous for similar offers, and this deal shows yet another reason why the company has earned the valuation it has.
And the winner is...
As for Groupon vs. foursquare, with the Gap example, it's clear which platform has generated the biggest financial windfall for the Gap, albeit at a high price to pay ($12.50 to the Gap for $50 in merchandise, compared to 25% off). To me, the lesson here is not that one business is better than another. I am huge fan of both. It is the difference between push vs. pull (search vs. discovery) and the psychological differences created between a short window for a good discount and the chance to use a discount, in this case a superior one, in the future by agreeing to an upfront transaction.
The good news for both businesses - they don't actually compete. Groupon should buy foursquare, and/or if foursquare so chose, they could enter the transaction space. They are both great features that have become well positioned businesses.
Brief Update (Friday, August 20,2010)
Unlike most Groupons, the Gap deal didn't become the side deal the day after being the main deal. During the deal, an article was published in Techcrunch quoting Groupon founder Andrew Mason that as of 4:43pm ET, Groupon and Gap had sold 300,000 coupons for total proceeds of $7.5mm with much of the day left to continue selling.
As for the actual tally, that's what everyone wants to know, and I don't think it's been disclosed because it is so many multiples better than the current. Based on the above, I'd say 500,000 - 550,000 units and $12mm+ in gross transactions processed. How does that compare to everyday?
Here's my hack guess on their current business based off experiences with NYC.
|NYC Avg Daily Sales||700||1000||1300|
|% US Share||5||8||12|
Which would yield:
On the moderate assumption (8% share, 1000 average) - 12,500 US sales per day @$35 average transaction, that would yield, $438k/day or approx. $160mm/year. Those numbers are lower than estimates. Going with the high assumption, of 26,000 sales on average, that's $910k/day and $332mm. Still a little lower than many guess, but if directionally accurate it shows the power of the Gap deal. It was at least ten times more popular than their average deal and probably 15x more. Wow.