Want to bargain together?

This story from the New York Times piqued my interest and has got my pondering the international transferability of a potentially profitable business idea.

The brainchild in question utilises social networking and web-based communities to build consumer bargaining power in negotiating cheap deals with retailers.  Now that in itself is not a particularly new idea, as buying clubs have existing before both online and off.

But this time round the business (here it is a mob called Groupon) focuses on using scale (and thus the promise of considerable bump-ups in customer traffic) to win over smaller scale suppliers of products and, increasingly, services.

This coalition building on both sides of the buy-sell equation helps to shift this intermediated relationship from one of virtual bullying (i.e. “If you all back me, I’ll go and squeeze every last penny out that nasty retailer/supplier by playing them off against their hapless competitors”) to almost an altruistic act of matchmaking and local boosterism (“Let’s all hang out and help out that nice new entrepreneur down the road build up some clientele… but at a group discount”).

In a world of Facebooking, Tweeting and web-based micro-entrepreneurs, how long until someone starts knocking on doors around Melbourne promising such love-ins?

(I eagerly await a comment now telling me of such a start-up).

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Fastest start-up in history?

I love this tale from Aussie blogger Ben Rowe about setting up a new web-based business. He went from conception to execution in 4 hours at the cost of $25 (not including labour – but it was a Friday evening, so probably free).

He taps into several staples of the web 2.0 zeitgeist – Twitter, t-shirts, outsourcing and tailored e-commerce.

His idea? Printing twitter posts onto t-shirts. Or, in fact, coming up with a neat design for the shirts and getting someone else to print on demand if an order comes through.

There doesn’t seem to have been any orders yet, so it remains to be seen whether this is a viable business (although there haven’t been many expenses yet anyway).

Ben has also noted that it turns out he wasn’t first to market. Will first mover advantage squash him?

Or will the market power of the existing on-line t-shirt giant Threadless see them win out with this little diversification/product-line extension?

What can Ben do to achieve a sufficient point of difference in the market?

Squeezing some value out of Twitter…

I have been avoiding mentioning Twitter on here on the basis it may well prove to be a passing fad. My chief concern with the businesses attempting to network or communicate via 140 character messages (other than the sheer time-wasting aspect), was that I couldn’t see much value in it from a competitive advantage perspective.

This story about small-scale wine-makers does shed light on one potential productive use. Several wineries have found it a very effective mechanism to connect with wine-buffs, and open up new markets and retail channels.

Making such connections is crucial for differentiating oneself in this very noisy and overcrowded marketplace. Trying to communicate a message about the subtle points of difference of your wines can be expensive and time-consuming if it requires engagement with the wine media (let alone broader mainstream media). This scenario represents a considerable barrier to expansion for new entrants and smaller players.

Twitter may serve to break down this barrier. It seems especially promising with respect to connecting independent retailers and small wineries. The former have a strong incentive to find less accessible but marketable wines (as a point of differentiation from bigger chains and their buying power). If small wineries can communicate consistently about the progress of their winemaking, about successes, customer feedback, special deals etc, this can only help.

Twitter will work best for any business when it reduces the costs of doing business, increases information flows and learning, and if it can serve to replicate (or capture sufficient elements of) existing selling points in that market.

I just spent a couple of days visiting cellar doors in the Barossa. Engaging directly with the winemakers (and the wines of course) is a huge bonding mechanism. Regular tweets could go some way towards simulating that experience.

What other businesses could benefit from this sort of customer engagement?

Microbrewers?

Bands?…