Posts Tagged ‘Groupon’

Race to the bottom

The way I see money being invested lately makes me think of a proverb, “a fool and his money are soon parted”.

There has been a lot of talk recently about “the gig economy”. The FT has a series titled the New World of Work. The NYT has been covering this as its part of the US election campaign as well (see: Defining ‘Employee’ In The Gig Economy). The WSJ continues on with What’s the Gig Deal?. The Economist was ahead of this trend in 2011 — Labour markets: The gig economy.

Anyway, this isn’t a post about the gig economy per se. For one, I’m enjoying the fruits of such a labour market, say every-time I ride in an Uber. This is me wondering if there’s a lot of money floating via a venture capital fuelled binge, in where companies spend lots of cash to acquire users, while trying to outspend their competition to become the monopoly in the space. This is basically a race to the bottom, except it doesn’t happen via government de-regulation, but more venture capital, the attitude that its better to do first and ask for forgiveness later, and governments wondering what hit them.

Why such a thought? Quite simply, read the headlines. Passport Asia wants “seven figures” to be the ClassPass of Asia. They’re entering a market where KFit exists (and is well funded, by meme hustlers, even). The bottom line being that this is all just a copy of ClassPass. Hopefully it’s “localised”, with the best option being an exit to them, eh? That was the modus operandi for Groupon Malaysia.

What about Uber? They lost a lot of money and will continue to lose more. They’ve even decided that its OK and this isn’t news.

It’s the case of business 101: you raise money, you invest money, you grow (hopefully), you make a profit and that generates a return for investors.

So let’s look a little locally at MyTeksi/GrabTaxi. They championed taxi drivers when Uber came into the market in Kuala Lumpur. They promoted the service like crazy, causing TaxiMonger to basically not exist, and Rocket Internet to pull EasyTaxi out of the market. Once the competition was removed, it became much easier to launch GrabCar and GrabCar Premium, which basically competes with Uber on the same MyTeksi platform! The taxi drivers finally woke up to a protest. But there are now a lot less choices in Malaysia and that’s the crux of the problem – the taxi drivers are using a platform that they’ve become dependent on but don’t necessarily like to be beholden to. And its only now that people might remember that they performed anti-competitive acts, like preventing taxi drivers from having competing apps on their phones (if detected, MyTeksi wouldn’t start).

Today, the headlines are: VCs see a bubble in food delivery services. $1 billion raised last year, and $750 million this year. Imagine the valuations. How much has GrabTaxi raised? Uber?

Yes, its a race to the bottom. As consumers, we should enjoy all these subsidised services. But never allow them to become a monopoly. Don’t be reliant on one app. Spread the love. You’ll get your subsidised services for a much longer time.

A Groupon before you close?

It has been nearly half a year since I last wrote anything about group buying sites.

Groupon DarabifI see Darabif everytime I’m in town. It’s the store thats been around Damansara Uptown for quite some time. I came back recently and noticed a blank spot, and Sara & I debated what was there before. Then we remembered, it was Darabif.

She had purchased a group deal for that exact store recently; 349 others bought the deal too. Darabif’s cost? RM2,722.20. Darabif earned after the discount? RM1,221.50 (at a loss of RM1,500.70). But wait, there’s Groupon’s cut which is half of what Darabif was to earn, so Darabif really walked away with RM610.75.

RM610.75 to feed 349 people nasi lemak and teh tarik for breakfast. That’s RM1.75/pax. When they usually walk away with RM7.80/pax. That deal expired June 6 2011. They’ve wound up June 30 2011 (their Facebook fan page suggests the nearest location is now Tropicana City Mall). This is the third Groupon the branch had participated in.

I asked on Twitter if anyone (especially group buying sites) had done studies to see how business fared post-group purchases. No one came back with a response. Google shows many people “studying” this phenomenon in America, with one example being: 5,722 new customers – how can I not love Groupon? However, nothing definitive.

Are you a business that has participated in a group purchase? Did you notice an increase in your customer base after the initial group buying thrill?

Thoughts on group buying sites

Congratulations to Khailee for getting GroupsMore sold to Groupon (in a record five months since its inception!). He tells me they’re now Groupon Malaysia and Joel (his partner, co-founder of YouthSays) is going to be CEO of Groupon Malaysia. A lot of people instantly said that since Groupon is now in Malaysia, all the other deal sites can go the way of the dodo.

I don’t think so. For a site that does group purchases to be successful, people need to know it exists. Savvy Malaysians have always been into group purchases because a) our currency generally sucks, b) its difficult to get cool stuff shipped to Malaysia. Of course the currency is improving now, and there are virtual postboxes that ship stuff to Malaysia for a small fee.

But I digress. Group purchasing has been happening for years, heck over a decade. I remember when PDAs (Personal Digital Assistant’s, in case you’ve forgotten) were starting to become cool, there were many forums for PDA owners to hang out at. PDAs require accessories and since it was not mainstream yet, the best place to buy accessories was on the forums with other forum members. Someone would collect the money and negotiate to get a deal done to bring in the items for cheap. Most of these forums probably don’t exist any longer, but the LowYat.Net forums are still kicking. I’ve seen this applied to other niches like photography as well; and I’m probably missing out a whole bunch of other industries where people gather together on a forum and choose to grab something at a better value.

This is why I’ve generally not been too excited by group buying sites. I see it as an old idea being rehashed, except this time the target is the masses. For a group buying site to be successful, I think a few rules hold true:

  1. you need to successfully get the word out to buyers
  2. you need excellent (convincing) copywriting
  3. you need to find good deals that your audience will want to purchase

Am I missing some rules?

Now to address some of the rules. How do you gain critical mass and get the word out to buyers? I focus on buyers because you may have a community, but if your community is only focused on making money rather than spending money, you’re not reaching the right audience. Depending on your target market, you will have to look at ads in the newspapers, radio, television, Google Ads, Facebook ads, and so on.

Malaysia is a melting pot. People generally don’t speak the same language, though English and Bahasa Malaysia are widely spoken. Copywriting needs to be spot on. If you target only the English-speaking audience, it will affect where you target buyers and it also affects the deals the audience are after. No point having great copy (in English), putting up ads in The Edge Daily, and having deals on products from Zaitun, right?

Audience, target and language all play a role for a successful general group buying site. We have to celebrate our diversity. In other words, there’s market for plenty of group buying sites. Do you think forum group buying will disappear? I don’t.

If you happen to run a group buying site, think of your niche and pivot. Why for example, have we not seen people focused on getting good daily (or weekly like GroupsMore does) deals on fashion items? Would a site that said “first 50 people to buy this model Coach handbag gets it at RM1,800 and the deal takes place, and if the number breaches 51, the bag becomes a mere RM1,500 for everyone” be successful? I think it will, if you’ve got the correct target market (people that buy luxury goods very rarely want to pay full price for them — if you’ve worked for your money, you’ll want to save ever penny).

We’ve just seen that in the UK, Facebook has launched Deals. From a cursory inspection, this looks like a cross between Foursquare and Groupon, i.e. it finally makes using a location based service useful. Not that its impossible to do with Foursquare — they sell custom badges to corporations. What I think Facebook will do is decentralise it, just like they currently have done with their ads — let anyone run one. Google Offers will work for anyone that has a Places page — you create a Places page (helping make a better location database, quite unlike Foursquare’s) and you give an offer to people (no check-in’s required). Very decentralised.

Tie group buying dynamics with social shopping aspects, provide useful bargains, and you may just have a very profitable business, that also helps spur the economy!