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The co-founders of TeamSave Lee Liu (left) and Chris Nuygen (right)
The co-founders of TeamSave Lee Liu (left) and Chris Nuygen (right)

Case Study

Startup picks fight with social-buying giant Groupon Add to ...

THE CHALLENGE

Chris Nguyen is the co-founder of TeamSave.com, a Toronto-based social buying business. When he launched it in April, 2010, he faced a problem common to many entrepreneurs: how do you compete against companies that are already operating successfully? In Mr. Nguyen’s case, the challenge is particularly daunting because he had to compete against half-a-dozen established firms, including Groupon, which recently obtained more than $100 million in investment capital. He can’t match their money, so throwing cash at the problem won’t work. What should he do?

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THE BACKGROUND

Mr. Nguyen got the idea for TeamSave.com last fall when he was planning his wedding in Mexico. He was responsible for organizing the flights and he was surprised to discover how big the savings were if he bought 20 tickets instead of one. Sensing a business opportunity, he turned to his previous business partner, Lee Liu, and the two of them began to think about how they could structure a business around social buying. In a nutshell, TeamSave is a social buying website that lets consumers – who may not know each other – buy as a group.

The company negotiates heavily discounted goods, services and events from hundreds of local businesses, and promotes them on the TeamSave website. Each deal has a minimum number of buyers and as soon as that number is reached, the deal unlocks and consumers can claim their purchase. This gives buyers a powerful incentive to get their friends to sign up.



<iframe src="http://player.vimeo.com/video/15002858" width="600" height="344" frameborder="0"></iframe><p><a href="http://vimeo.com/15002858">TeamSave - How it works</a> from <a href="http://vimeo.com/user4740310">Team Save</a> on <a href="http://vimeo.com">Vimeo</a>.</p>


Mr. Nguyen didn’t go into TeamSave unarmed. He’d already started and sold a previous business, JobLoft.com, an online job board on which people could search for jobs by geographical location.

“When we started JobLoft we had to compete against all the established firms in the job board industry, and there were some very large, established ones,” stated Nguyen. “You’re always going to have competition, so you have to strategize unique way to overcome the obstacles.”

THE SOLUTION

Nguyen believes in being a “fast follower.” Being the first firm in a market can be risky and expensive. Not only do you have to prove that customers will buy into your business concept - which can be a long and pricey process - but market pioneers are also prone to hitting a few roadblocks along the way. Once the ground is laid, however, and a market leader emerges, other firms can ride the buzz already created. But you have to move fast.

Nguyen identifies three elements to his “fast follower” strategy.

1. Launch before your competitor is established in your back yard. You know your local market and so are well-poised to grab it. Nguyen moved very fast with TeamSave: their first line of code was written in January and they launched four months later. To expand, look for secondary markets your big competitors aren’t interested in. For example, Nguyen is looking at Buffalo and Ottawa, rather than New York City and Los Angeles.

2. Design a viral communications campaign which leverages social media to your advantage. You can’t match the advertising spend of a large competitor, but you can develop a strong social presence in your local markets by participating in events and using social networking tools such as Facebook, Sprouter and Twitter. “We’ve found that grassroots initiatives are pretty effective and the best form of advertising for us,” says Nguyen

3. While launching locally, do so with a vision of how your business will grow. From the first day, build a scalable business that can follow this growth path seamlessly. Nguyen’s co-founder Lee Liu realized that many different organizations and groups would be interested in group buying and so he designed the technology so it could be sold as a private labelled platform. As a result, TeamSave doesn’t just sell group buying benefits to individuals, it also sells “TeamSave in a box” to groups and organizations.

THE RESULT

Nguyen’s strategy seems to be working. TeamSave is aggressively growing in two cities (Toronto and Buffalo) and Nguyen plans to be in five cities in the next three months. Their social media presence is growing, and now accounts for 42% of their traffic. They’ve already licensed their technology to one organization and others are highly interested. They’ve even turned down talks with a company that wanted to buy them. Nguyen explains, “Our passion is to provide an innovative new form of advertising for local businesses. As our larger competitors shift their focus nationally, the door opens further for TeamSave to strengthen our focus on the local merchants. Besides, why sell now while we’re having fun?”

Special to The Globe and Mail

Becky Reuber is a professor of strategic management in the Rotman School of Management of the University of Toronto.

This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Your Business website.

 

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