Idea: 3
Saturday, 03 January 2015
By. Ian*
Backdoor
Give businesses a way to sell excess inventory at steep discounts to consumers sworn to secrecy, so as not to spoil brand or pricing power.
Groupon & its clones are great for driving traffic, but it has got some serious side effects: it encourages mercenary consumer behavior, and spoils brand and pricing power. Same with Priceline: consumers love the discounts, but once they know they don’t have to pay full-price, they rarely go back.
When I interned at Google in 2010, they gave me an interesting project. At that time, the top 10 websites on the internet generated 75% of traffic, and the top 1% generated 99%. In other words, the internet was top-heavy, so premium publishers were really valuable. Google owned the long-tail, but had a hard time convincing sites like The New York Times (example) to sell their ad inventory on an open market like the Google/DoubleClick Ad Exchange, when their dedicated sales teams could fetch higher prices going direct to advertisers who would do exclusive deals. BUT, premium publishers always had lots of excess inventory that they were not able to sell at retail prices, which they also could not liquidate at a discount, as it would dilute their pricing power. So, Google did deals with premium publishers to liquidate their excess inventory by anonymizing it (my job) on their open market. Buyers didn’t know they were getting ESPN.com (example) exactly, but they did know it was a premium sports site at a heavy discount.
There’s a whole set of businesses that struggle with similar excess inventory problems. Airlines, hotels, restaurants, retailers, hair and massage salons, spas, experience providers, and more. (Even legal and accounting firms have access inventory! I wonder…) If they could liquidate excess inventory at heavily discounted prices, they would waste less time and money. But doing so publicly would ruin their brand and pricing power.
Experience
Enter Backdoor. Consumers sign up and express interest in various types of products and services. When a business can get them in, “through the backdoor”, at say, 75% off, they show up at the time and place designated, their credit card is billed, they buy the product or enjoy the service, leave, and never say a word — save to tell all their friends about Backdoor.com. The benefit to the service provider is that they never have to publicly acknowledge offering discounts, maintaining their brand and pricing power, while still liquidating excess inventory. The risk is that it becomes too hard to enforce an NDA on a consumer, and they go ahead and tell all their friends anyways.
