We all know that consumers are not as excited about the Groupon emails that land in their inboxes as they used to be, and we’ve all heard the horror stories of businesses that were overwhelmed or even destroyed by a poorly planned campaign. But, some businesses are making them work. Here’s one.
24-year-old Jacomo Hakim, known to his friends as DJ Jacomino, was instructed by his father to get a real job. Inspired by the lap band surgery his dad underwent, he created a business to tailor clothes to match his father’s new look and size. Mr. Hakim started a custom tailoring business making men’s suits and shirts. In 12 months, Book A Tailor has generated over $1.2 million dollars in revenue and plans to have 40 showrooms by the end of 2014. He attributes all the success to leveraging Groupon and LivingSocial.
Book A Tailor, based in Great Neck, NY, started by selling swatches and look books to mom-and-pop suit shops. But Book A Tailor ran into three major problems – quality control, communication with its foreign manufacturer, and inconsistent delivery times. One day, Mr. Hakim got an email from someone at JP Morgan Chase asking if he could come in to his office and fit him for a suit. That’s when Mr. Hakim decided to ditch his manufacturer, change his business model and focus on selling direct to consumers. To raise cash flow and build a client list, he ran his first Groupon deal.
With Groupon taking 50% of the sales revenue, he wasn’t sure how they were going to make any money. The company had just opened its own factory in Thailand, and he wasn’t sure what exact costs would be without a significant volume of business. They didn’t have enough orders from the suit shops to support the overhead of the new factory, so Mr. Hakim took a gamble on Groupon to jumpstart his business. The first Book A Tailor deal was for two custom shirts at $99, four shirts – $179, a suit for $450; and a suit and shirt for $499. With their first deal, they sold 200 coupons. But how you make money on any daily deal is the upsell. His goal during the first appointment with anyone who bought a coupon was to sell more than the coupon’s value. His first customer ended up buying six custom shirts, two more than the deal. Mr. Hakim also upsold the customer on different fabric choices, a move that gained him an additional $300 in revenue he didn’t have to split with Groupon. Since the first deal, Mr. Hakim made daily deals a key element of his pricing model and the business has grown significantly. Typically, they run four to five deals a month across different cities. They have also been able to negotiate a better percentage split with Groupon to make the numbers work. Book A Tailor runs deals on Amazon local, Gilt City, Groupon – where they have earned $250,000 in revenue and on LivingSocial where they’ve earned $500,000 in revenue. LivingSocial ranked them their site’s biggest merchant in Midtown Manhattan based on their sales volume. Book A Tailor had its largest sales day recently, which was 500 paid deals booked on the same day across all showrooms.
Before the first deal launched, the business was running from a conference room in his Dad’s telecom office. After the first deal, they expanded to a 10×10 showroom space for $1,000 a month in New York City where customers could show up for fittings. Now, the company has 18 employees and has launched 8 additional showrooms – Long Island, Washington DC, Chicago, Beverly Hills, Atlanta, Charlotte, San Francisco and Miami. He said has seen a lot of his customers return, they’ve had over 500 repeat customers since launching. “When a person finds a custom tailor that can deliver a beautiful product on time, they are not going anywhere else,” said Mr. Hakim. His formula is getting customers into the showroom using deals, producing a quality product and over-delivering on service so that they come back. Based on their rapid expansion, the formula seems to be working.
He uses different daily deal sites because his main goal is to drive traffic into Book A Tailor showrooms. When he launches a new showroom, he already has pre-booked business- on average he’ll sell 200 coupons pre-launch which avoids the traditional retail game of betting on street traffic and direct mail to find customers. They also developed an enterprise system that tracks the entire process from fitting to delivery. “I track everything – it provides organization and automation, “ said Mr. Hakim. He believes that he would not have been able to scale so quickly without the system. They promise four weeks but usually surprise clients with delivery in two or three weeks.
The deal sites have started filtering their emails which means customers get certain deals instead of sending the deal to everyone. Many merchants including Book A Tailor are not happy about it. Previously, deals would go to the entire database, 3.6 million people which generated on average 320 orders. Now, they are doing select filtering which does not yield the same return. For instance, 44 percent of Book A Tailor purchasers are women. But using select filtering, the daily deals are promoted to male subscribers, which has significantly decreased their reach to from 3.6 million people to 1 million people.
Mr. Hakim plans to expand his marketing to TV commercials so that the majority of his leads aren’t coming from deals. “I’m not worried, at this stage, I know my business and our value so I know what it takes to get customers in the door and convert them to long term customers. TV is a calculated risk but we didn’t know what would happen when we started with the deal sites either.”
Mr. Hakim learned a lot from growing his business through daily deals. He suggests that people don’t participate on deal sites unless they know they can reach a target customer that will return and buy again. Here are a few more suggestions:
- Update Your Customer Service Training: A customer who buys a deal could become a customer for life, if they have a great experience.
- Have an upsell: Create a basic offer, but make sure that you train your phone sales people and any direct sales people on how to close your upsell offer.
- Track your process: Create a consistent system for your product or service delivery, and have contingency plans for vendors.
- Use your deal to build your list: Targeted pushes through daily deal sites will limit your reach, but it could be a great way to develop a highly responsive email list.
- Get the Numbers Right: Know what it costs you to deliver your product or service. Don’t price yourself under what it takes to at least cover your costs.
“Special Offer Shopping Bag Shows Bargain” courtesy of Stuart Miles / www.freedigitalphotos.net
Can you share your experience with deal sites?