Buy a massage and help your neighborhood?
Posted on Tue, Mar 15, 2011 @ 01:04 AM
Guest Post by Ethan Montoya, Co-Founder & CEO, DoloresDeals.org
If you’re like me, you would feel guilty paying hundreds of dollars for a spa treatment. Because when you peel away the kiwi slices from your eyes, you see the world differently than most. You notice the homeless man on the corner or the run-down elementary school across the street.
At the same time, you feel entitled to spend your hard-earned paycheck as you see fit. After all, who wouldn’t want to relax after a long week cooped up in an office?
Fortunately, a new breed of e-commerce companies wants you to have your cake and eat it too. While they are still finding their footing in an evolving industry, socially-responsible group-buying sites are leveraging the collective buying power of millions of consumers to lower the prices of luxury goods and re-distribute profits to great causes.
Since Groupon offered its first deal in October 2008, the group-buying industry has been a disruptive force in e-commerce. Forbes Magazine recently reported that Groupon will reach $1 billion in sales faster than any company in history. The company has raised a record $950 million in venture capital and recently turned down Google’s $6 billion bid for an acquisition. In large part, it has used its immense war chest to acquire companies overseas, instantly turning the group-buying model into a global phenomenon. LivingSocial, its largest competitor, raised $175 million from Amazon and is steadily gaining market share in the U.S.
But is this unprecedented growth sustainable?
New and exciting at first, Groupon’s model often leaves a bad taste with many local businesses in the long-term. Groupon provides small businesses with unprecedented access to mass marketing, but at a steep cost. After it negotiates deep discounts, Groupon charges businesses 40-50% commission for each sale on its site. For example, when a consumer purchases a $100 spa treatment for $40 on Groupon, the local businesses only receives $20. In many neighborhoods, the words “daily deal” will throw a small business owner into a fit.
Unless the group-buying sites want to go down in history as the robber barons of our generation, they are going to have to re-think their models.
To its credit, Groupon recently took a stab at a cause-driven campaign. The company offered to match $15 donations from its users to Greenpeace, BuildOn, the Tibet Fund, and the Rainforest Action Network.
Unfortunately, Groupon put its foot in its mouth. In a move that left millions of Americans cringing, it ran a SuperBowl commercial that mocked the very cause it was trying to support. Actor Timothy Hutton spoke somberly to viewers, saying: "The people of Tibet are in trouble. Their very culture is in jeopardy.” Then he exclaimed: "But they still whip up an amazing fish curry!”
National media, throngs of twitter followers, and even the local Chicago press blasted the company. The front page of the Chicago Tribune read: “Groupon Tibet Super Bowl TV ad discounts taste, sensitivity.” One humorous tweet from a founder of Ogilvy PR firm summed it up: "Groupon seems to have achieved the unique feat of paying $3 (million) to lose customers who previously loved them."
But lost in the uproar was an important victory for corporate social responsibility. The market leader in group-buying and the darling of Silicon Valley was devoting significant resources to charitable causes. The movement for socially responsible consumption among group-buying sites is picking up steam.
Digital media has the ability to put a face to causes like never before – whether it’s earthquake victims in Haiti or bloodied protesters in Cairo’s Tahrir Square. It’s only natural that consumers will become more cognizant of the world around them, and embrace the power they have to support organizations working to change it.
But they need look no further than their own neighborhoods to make a difference. What about the homeless man on the corner and the run-down public school that we passed on the way to the spa?
I recently co-founded DoloresDeals.org, a group-buying site that is focused on giving back to your immediate neighborhood. Named after the famous community hub Dolores Park in San Francisco, DoloresDeals.org is based in the Mission District, a neighborhood that is ripe for socially-responsible buying. The Mission is a beautiful fusion of two worlds: a vibrant Latino community and a growing community of culturally savvy urban youth with disposable income.
For every deal purchased on DoloresDeals.org, we donate a percentage (15-20%) to a featured charity in the user’s neighborhood. As we gain more traction, users will be able to select the specific charity or cause (like education or homelessness) that they support.
Neighborhood non-profits, which have a block-by-block impact in the communities where we live, are welcoming the support with open arms. Many national charitable organizations are able to access corporate sponsorships to raise funds, but the 5-person non-profit down the street has to be much more inventive. It is becoming more common to find tech-savvy, entrepreneurial executive directors at small organizations who are comfortable with guerilla marketing and social media.
For our first deal, we are raising funds for the Women’s Initiative for Self-Employment, a great Bay-Area organization that helps talented women from all backgrounds start their own businesses. We are donating 50% of all sales to this great cause.
The future looks bright. Socially-responsible group buying is a growing movement. We have new tools at our disposal to generate unprecedented social good from the consumption of luxury goods. As we go forward, our guiding principles must be 1) impact, and 2) transparency. The consumers will follow.
About the organization:
DoloresDeals.org is a social enterprise, group-buying fundraising platform for non-profits in the Bay Area (like Groupon for good)