Online voucher scheme Groupon hits UK with a bang

It was the kind of flash mob that only the internet can generate.

A few days after Christmas, at a heretofore obscure dry cleaners in the London borough of Islington, a horde of trendy young folk turned up with their laundry, overwhelming the staff of the Drycentre on Southgate Road.

What was it that had caused this sudden outbreak of demand for dry cleaning services? It was a special offer selling £30 worth of Drycentre services for just £10, an offer advertised to local residents via an email from an internet company called Groupon.

Maybe you haven't heard of Groupon yet, or have only just come across it. You are going to hear the name again and again. In the US, Groupon is already a sensation and it is taking the UK by storm, too. More and more people are signing on to receive its daily diet of special offers from local businesses. It currently covers 500 cities in 35 countries.

It boasts 50 million users who have signed up to get emails who, between them, have saved over $US1.2b in total thanks to the company, since it was founded two years ago. Despite its low-profile, Groupon already boasts five million users in the United Kingdom.

By most reckonings - including that of Forbes magazine - it is the fastest-growing company in the history of the world, in terms of the revenues it is generating.

Late last year Google offered to buy the company for $6bn, but its founders were unimpressed and turned the offer down. Instead, it raised $950m for investors who believe it will be the next big internet sensation. Among those was the founder of Starbucks, Howard Schultz, who - it was announced last week - is joining the Groupon board.

In the awful management consultant jargon of the moment, Groupon offers a "win-win-win": customers get more than half off on special deals at their local restaurants, shops or other businesses; the local merchants get an influx of new customers that advertising in the local paper would never have generated; and Groupon takes a cut of typically half of whatever monies change hands.

Essentially, Groupon has made it trendy to seek out a bargain.

However, its progress is being watched by the Advertising Standards Agency in the UK, which is keeping an eagle eye on the claims it makes for its deals.

Just this week, the regulator chastised Groupon for promising buyers a 74 per cent saving if they paid £24 for a voucher for a four-course meal at a Nottinghamshire pub.

The 74 per cent was calculated against the most expensive possible meal, so the savings on most menu choices would have been much lower.

Groupon agreed it would put "up to" x per cent in the blurb for similar deals in the future, adding: "We have no interest whatsoever in misleading our customers, because if an offer was poorly described on our website it detrimentally affects our relationship with both customers and our business partners alike."

The ASA's ruling has not been the only headache for Groupon recently. With much hoopla, it premiered its first-ever TV advert during breaks in the Super Bowl last Sunday and has been apologising ever since.

In a tone that the company's bosses presumably thought was as adorably whimsical as its website blurbs, the ad featured actor Timothy Hutton bemoaning the plight of the Tibetan people under Chinese rule and then saying: "But they still whip up an amazing fish curry" - on which you can get big Groupon discounts in local restaurants.

"We hate that we offended people and we're very sorry that we did," Groupon founder Andrew Mason wrote on a company blog on Thursday, announcing the premature end of the TV ad campaign. "While we've always been a little quirky, we certainly aren't trying to be the kind of company that builds its brand on creating controversy - the quality of our product is a much stronger message."

Mason might be forgiven a youthful misjudgement. He is only 30 and looks set to take his place in the pantheon of baby-faced internet gods, alongside Mark Zuckerberg of Facebook and the Google founders, Larry Page and Sergey Brin.

A Philadelphia native, Mason found himself in Chicago running a start-up called ThePoint.org, which tried to encourage groups of people to get together to do charitable works, until he realised that selflessness was no match for the self-interest of bargain-hunting.

Now, around the globe, Groupon fans are rushing out to local restaurants or stores that they would never otherwise go to and loading up on goods and services that they would never otherwise buy, besotted with the excitement of getting a bargain.

New Drycentre customer, John Ryan, for one, is trying to keep a cool head: "I'm only going to use it if the deal suits me - and it usually doesn't.

"At the moment, I'm getting a lot of deals on women's hair reduction. But I haven't rushed out and had anything waxed yet."

- THE INDEPENDENT