A Q&A with Bloomspot’s Jasper Malcolmson
As the bubble bursts for group-buying sites like Groupon and Living Social, San Francisco-based Bloomspot is surging ahead with targeted local offers that connect high-quality merchants with their best customers. Co-founder and Canadian expat Jasper Malcolmson believes he’s nailed the online-deal model that will stick.
What do you think of the existing deal-of-the-day business model?
I don’t like it. I’ll call it “local offers,” because even the word “deal-of-the day” is a bit of a funny name. It’s a local shopping model. That aside, our take on the business model is that discounts are loss leaders and loss leaders only work in the context that consumers spend—or return and spend—above the loss leader. In other words, if I give you a discount, that’s great. But it’s not a great experience for the merchant if the consumer doesn’t spend in excess of the discounted service or return to the business and pay full price.
Has the bubble burst on that model?
Totally. In the last six months, Facebook pulled out [of group-buying], Open Table pulled out, Yelp pulled out. Almost every small player in the business has disappeared. Living Social is under significant pressure, Groupon’s stock is down. So yes, we’re beyond the shakeout in terms of where the space is at.
So, what’s the shelf life of the deal sites that remain?
To give you a more nuanced answer, there are two types of businesses. There are businesses that are happy to discount all the time, like zoos, because when they discount their entrance fee, it doesn’t incur any cost. So more people come and they spend money on attractions and food. For them, the Groupon model works just dandy. But for a restaurant, consumers don’t spend above the discount and don’t return. Because merchants have food and service costs associated with that discount, they’ve effectively lost money. Overall, the Groupons of the world may continue to serve a particular group of attractions and specialty services but they won’t be successful serving the better-quality merchants in a number of the most important categories. I’m not saying the likes of Groupon and Living Social will go away, they will just become smaller.
What makes Bloomspot different?
We focus on a set of consumers that spend more and return more. And we’ve done that in part through technology. That is, we use consumers’ credit card data to effectively close the loop on the transaction. We measure the degree that the certificate is used to drive additional spend and consumers’ return [to a particular vendor], and we give consumers strong incentives. To our merchants, we provide a dashboard and for each consumer we show the degree they have spent additionally and returned.
Why would customers give their permission to use their credit card data?
We do not look at the consumers’ credit card transactions or their personal data.
We just check on whether the consumer has used their credit card at the restaurant they bought a certificate for. We work with the credit card processors that don’t see the consumers’ overall personal data… they see whether that particular number floats up through their network. That way consumers feel it’s not an invasion of their personal privacy, that it’s specifically measuring how they spend and rewarding them at that specific restaurant.
As someone immersed in the Silicon Valley-style of doing business, what advice would you give business people and entrepreneurs in Canada?
In one way they’re similar in that it’s a very relationship-based culture here. People get to know each other, they trust each other, and they operate and do business across multiple companies, as opposed to the East Coast of the United States where it’s very transactional, very legalistic. The one difference is that in California and Silicon Valley, people are really comfortable with failure because there are so many different companies starting and stopping all the time. People are quite comfortable to start something, run it for six months, stop, regroup and reorganize into another business, sometimes within a manner of two weeks. Canada needs to embrace a culture of willingness to start, stop and change, and be comfortable with that.
This company’s bloomin’
Number of employees: 100
Investment Raised: $40 million in funding last August
Growth: Expanded to 10 core U.S. cities with more than 2.2 million members. Partnered with 3,200+ local businesses, including 100 Zagat-rated and 25 Michelin-rated restaurants
Canada-Bound? “[It] is certainly a high-growth and attractive market—and close to my heart. International expansion could begin with our neighbour to the north.”
