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Groupon and four other firms thrived in recession. Their secret?

December 29, 2010

Published by The Christian Science Monitor

Although the recession is technically over, many companies are still struggling to make up for lost profit, customers, and locations. But some companies have come out of the recession better than they went in, thanks to their adjustments to consumer demand and other smart business strategies. Here are five companies that have thrived despite the worst downturn since the Great Depression:

1. Groupon

Deal-a-day website Groupon achieved the seemingly impossible: It launched in the midst of economic chaos (November 2008), spread to 300 markets in 35 countries (in about two years), rejected a $6 billion buyout from Google (earlier this month), and just announced a plan to raise almost a billion dollars in private funds. The Chicago-based company e-mails daily discounts for local goods or services to each of its 40 million subscribers.

For consumers, the “groupons” can offer substantial discounts: $25 for a $50 coupon at Nordstrom Rack, 50-plus percent off restaurants, museum admission, and the list goes on. Vendors get exposure to new customers. Most, if not all, of the deals are for nonessentials – spas, hotels, and entertainment. Groupon’s $500 million annual profit suggests that at half off, even the stingiest savers in stingy times can be convinced to spend. The company’s formula has inspired many competitors – LivingSocial and BuyWithMe among them – who hope to profit as well.

2. Panera

Eating out was one of the first indulgences to go for many Americans forced to make cutbacks, and so, the restaurant industry suffered during the recession. Even inexpensive quick-service restaurants saw customer visits decrease throughout 2009 and into 2010, reports market research firm The NPD Group. But not at Panera Bread.

In the year following the fall 2008 stock market collapse, the share price of the St. Louis-based bakery-café chain was up 26 percent. Why? Because the company was growing while others were shrinking. In the last three years, Panera took advantage of low real-estate prices and construction costs to open 191 locations for a total of 1,421 company-owned, franchise-operated units in 40 states and in Ontario, Canada.

“The best time to grow is in a recession,” Panera’s executive chairman and founder, Ronald Shaich, told Bloomberg Businessweek last month. “The worst time to grow is in the boom days.”

3. Netflix

The concept of driving to the video rental store is nearly dead now that movies can be rented via On Demand, Hulu, and iTunes, then streamed on laptops, iPads, and game consoles. The way consumers watch TV is changing, and Netflix knows it. The company boasts 16 million members in the US and Canada, and gained nearly 3 million of them in 2009, when the economy hit bottom.

In November, Netflix announced a 100 percent streaming subscription plan that costs $7.99 a month. The plan, a direct response to evolving consumer preferences, gives members unlimited, instant movies and TV episodes. A similar service introduced in Canada this September surpassed the company’s expectations. The company attributes its success to convenient subscription models and a broad library of DVD and TV titles.

4. Anytime Fitness

The Anytime Fitness franchise shows that consumers will still prioritize their well-being – even when times are tough – if it’s affordable. In the last three years the company has opened 900 new clubs, at a rate of almost one new location a day. Though exact membership fees vary by location, dues are generally around $1 a day.

“We’ve identified what people truly want. We’re smaller neighborhood fitness clubs that are open 24 hours a day,” says Mark Daly, the company’s national media director. Members of one Anytime club can use any of the franchise’s 1,400 locations, in all 50 states and four continents. The company has jumped on the social network bandwagon as well. The clubs’ nearly 1 million members can use the Anytime website to connect with each other, ask questions of fitness experts, and set goals.

5. A123 Systems

The clean-energy industry has been one of the winners during the recession, according to research firm Clean Edge, as consumers and companies have shifted toward clean energy technology. One of the sector’s biggest stars is A123 Systems, builder of next-generation car batteries. It saw revenue jump 33 percent in 2009 thanks to the shift, and with a bit of help from the government.

The Watertown, Mass., company drew national attention in 2009 when it won a $249 million Recovery Grant for advanced battery technology from the US Department of Energy. A123 Systems produces batteries for electric grid services and next-generation vehicles using nanoscale materials originally developed at the Massachusetts Institute of Technology. It currently supplies batteries to Chrysler for its electric-drive ENVI vehicles.

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