Group Buying Deals in Malaysia

My apology for not updating the blog for some time, my current project takes up my time than I liked.

For the past 3 months, I've observed the rise of Group Buying deal in Malaysia and it is quite amazing, I believe by now there are at least more than 100-200 companies with similar concepts. Here are several I've encountered and know of so far:

  • Everyday, that was recently acquired by Korean based Ticket Monster is probably one of the early adopters of Groupon model and has been really successful in the market with strong database.
  • Groupon, originally called GroupsMore was acquired by Groupon and ranks number 2 probably.
  • Others like JigoCity, CouponHouz.com (collects zero commission from merchant, instead collects from members), WeBuy.com.my, Deal4Real.Asia, MyDeal.com.my, etc.

I have also noticed a lot of other sites that would always display "wait until new deals are announced", this translate into they have not secured a strong merchant database or merchant are just simply refusing to cooperate with them. You'll notice a lot of sites in Malaysia will have this.

I do have concerns on the competitive edge and also the limited amount of merchant in the market that are constantly being lured to do deals with these companies. Their profit margin must take a deep whenever they do this, especially for the smaller business owners. I've observed that the average group buying deals that can be reached per deal is between 500-3000 which is relatively small for a country this size and pretty decent Internet penetration. Then comes the customer quality with it, are they just looking for cheap price and huge discount or are they quality is something that can be argued from both side of the fence. Malaysia is also a very price sensitive market, if you look at Hong Kong the average group buying deal price there is anything but cheap, which what I believe is good for both sides - group buying deal company collects more money, merchant pricing is not compromised and also doesn't have to dance around the cost, at the same time the customers get a great value-for-money deal.

If you also noticed at the business sustainability, you should run between 3-5 deals per day. But the sites in Malaysia runs between 3-10 deals a day and the original concept was supposed to be 1 special deal per day, so you can see their business also needs a certain amount of deals to be bought for them to break-even I imagine from the ads they are spending, staffing and other operations.

Then we look at the commission percentages these company will take from the merchant, it varies between 20-50% based on the discounted price (thank god its not based on the original price). But this still means a lot of money for both side, by the way this commission is a lot more than what I have encountered in China which is a lot lower (of course China has the buying power and also the numbers).

My advise before you "make a deal with them" is to look at your business model first, the size and your financial capability. As Group Buying Deals is not about profit at all, it is "trying" new customers (when I say trying as in really trying your hardest to at least attain 5-10% of the clientele, as remembering as it is a price that is sliced in half it of course impact the client quality at the same time, not that all is on the discount hunter side, but you get some of them). Smaller business do need to 三思而行 before deciding anything as your Profit & Loss is very sensitive, especially in Malaysia market.

Remembering these are the rule when you go into group buying deal:

  • It has to be 50% otherwise there will be no buy, its not about profit but you can't loose money either. Look at your cost and slightly increase it just to be on the safe side.
  • Check what is the commission percentage the group buying company wants, this is where you loose a bit more money. Negotiate!
  • Predict what the sale will be and if you are in food/restaurant (which most of deal are), allocate your voucher consumption per day. As you need to balance out between current/old customer with Groupon customer.
  • Think of a program and a campaign under-layering it to try and capture and convert them into your business ends in the long run.
  • Capture database, mobile, email or even get them to like your Facebook is just some I would run side-by-side the group buying deal.
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More China Groupon Ads

If you are in China recently, you'll see a lot more of Groupon ads from different websites. Its just blanketing the whole city, on every channel you can imagine - banner ads, bus, TV, posters and so on. According to Gang Lu, China tech Internet expert the Groupon industry in China is spending millions and millions or RMB to promote their service superiority.

Direct quote from Technode, below are the amounts some of the Groupon sites will spend on advertisements:
  • Groupon.cn said that in 2011 they will  spend RMB 550millions (~$83.7millions).
  • It’s said that Lashou‘s $50millions capital, most of them will be spent on the advertisement;
  • Nuomi (RenRen or Oak Pacific Interactive company) said their budget is RMB 200millions (~$30.4millions).
  • It’s RMB 130millions (~$19.8millions) for Meituan and Manzuo is RMB 100millions (~$15.2millions).
Although I felt each service provides the same deals, I guess its just a matter of 'numbers game' in China - which is race for how many users they can garner. I would be interested to know how much is Dianping and Gaopeng (official Groupon China) plans to spend for ads in China, any takers?

According to Tencent latest presentation:
  • In 2010, Groupon users in China has grown 250x times.
  • By end of 2010 there are 18,750,000 Groupon users in China, with a total transaction value of RMB 8.9 billion.
  • It's a 760 million dollar industry, globally.
  • Groupon US refused Google buyout at USD 6 billion.
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China All-out Groupon Wars

Groupon after somewhat rough entry into China market (contradicting Tibet advertisement, hiring first time laowai as their China boss and launching the site without the partners consent), finally launched their Chinese website in conjunction with Tencent. It's funny, in marketing there is one part where it is said (and proven) that once you have found a unique niche business, be careful of the followers. In order to "keep your head above the water" (or competition), you have to stay ahead and fast, as well as have the next phase of development. I guess this applies true in today's Internet business. Groupon although was the first to start in 2008, it was the last to enter China market which represents the biggest bulk portion of Internet citizens of the world.

Anyway, I spotted their online banner ads today and thought this might make an interesting blog post. According to Gang Lu from Technode, Groupon or 团购 in China is spending millions of RMB of ad budgets ranging from 50 million to 550 million. I'm looking at the main page of Gaopeng or Groupon (official) China page at around noon time, so far they are selling an RMB 155 deal and only 28 people have bought it just for Beijing market (Beijing is a city with population of 18 million people). I will post an update at the end of the day to see if their deal is successful or not, as there is peak season which is the morning before work and night after work (as companies have started blocking out Groupon sites).

The second interesting thing I thought is good for sharing is the ranking of Groupon sites in China by iResearch for January 2011 only, Gaopeng or Groupon (official) China being new is not in the game yet. Conclusions as follow:
  • Taobao groupon is leading in terms of how many people visited their site - total 75 million people total for January.
  • Meituan groupon is leading in terms of how long people spent on their site - average a month at 8:48 in January.
  • Also interesting to note that QQ has its own Groupon, which is largely and clearly under Tencent (wonder if this is conflict of interest).
  • Groupon.cn is not affiliated with the official Groupon, but the name's site (Groupon.cn and Groupon.com.cn) has been registered in China. Although it seems they affiliate themselves with the official Groupon.
I've also included several screenshot of other China Groupons main page.

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Dianping Enters China Tuangou

Joining the latest China Groupon craze is Dianping, Dianping is pretty much similar to ZAGAT which has started earlier and has worked closely with restaurants. This gives Dianping an advantage of having already a strong network, not considering they have large diners database, solid reviews, editorial team for support and restaurant advertisers.

I do believe Dianping Tuangou or Groupon will be a very strong competitor in the market, especially since they already have an existing restaurants, bars and spa listing to work with. But of course they have to worried on positioning against two thousands of their similar peers clone in China alone. Not mentioning Groupon has just hit strike four in China.

Here's why I think they will rise up fast:
  • Dianping started their restaurants directory listing and reviews since April 2003, almost 8 years in business and strong user base.
  • Since their opening, they've expanded into bars, spa and entertainment venues listing.
  • Their listing covers over 2,000 cities in China, with over 1 million listings.
  • They do not need to re-approach the restaurant, not mentioning they don't need to explain what is Groupon as everyone has done it probably, so it works in their favor as the market is ready and embracing Groupon.
  • Adding on top of that is Dianping has promoted its brand strongly in the China dining industry arena.
  • Other China Groupon clones when launching restaurants deal will pull review mostly from Dianping, while Dianping already has them and can pull "celebrity" rated reviews (by celebrity means people that uses Dianping heavily and gets a lot of credit or flower which raises their profile as top diners in the city, their review means the world for other users and becomes a guide).
  • If you look closely to details of the deals, you'll see on the right hand side, Dianping can easily launch a deal with a chain restaurant, pull up all the listing of the location and also reviews, giving users flexibility on finding not only one restaurant to go to, but also multiple if it is a chain, thus guaranteeing that people can actually use the deal.
  • Finally, again the strong database they have for years Dianping has been promoting their membership cards, they even work in promotion with Banks in China.
I do question or more likely to caution restaurateur in China to ensure they have a strategy set for utilizing these type of Groupon, remember that discount means you are eroding your profit margin and also hurts your positioning. The only way to compensate is to ensure you have a longevity on your marketing goal, that is to capture database or get more positive reviews. 

I've worked with one Groupon deals previously, does not mean when you give discounted you get half the service, you have to shine as customer has to be satisfied and also don't get addicted, I met restaurateur or F&B people that gets addicted and believes these are the diners source. Which is not, as you know the price around Groupon in China is around RMB50-200 average if you are operating an upscale establishment, this is not the platform for you.

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China Groupon update: Sex sells, literally

Had a meeting with the people from Meituan or China Groupon, it was interesting to see their concept and back-end management (which their management team is as young as they are, not surprising for this generation).

The other day I also just saw the Jisbon condom sold on the Groupon site, which within half a day, over 50,000 were sold at CNY 1.
Well we know in the marketing world that sex sells, but this is quite literally and we are talking China.
Has China or the new generations moved pass their community firewall, how will this change the society on the next level?

I personally would not recommend company do Groupon over extended period as it will eat into your profit or not make any profit for you. However there is a plus side on how you can use this.
- During your need period or low season.
- Up sell, your team will need to work the floor to get them to buy more on top of what they have already have as a package from the site (e.g. membership, dish, etc).
- Capture database, entice the walk-in customers to sign up for newsletter or fill-in comment card to get rewards or create a competition.

For any business owners that are planning to engage on Groupon, I'd recommend a strategy or campaign on top of this, so you can leverage more than just break-even in ROI. Leveraging this will generate additional revenue or database increase or buzz or awareness or anything else, opportunity are endless.

Since we can't deny that sites like Groupon would definitely draw a lot of traffic, a direct link building from their site to yours will also be a plus.

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