Groupon clones ditch business model

Groupon clones ditch business model

Tuesday, Feb 25, 2014

Victoria Ho

The Business Times

AS MORE Groupon clones fall by the wayside, another Singapore contender is turning away from the voucher model to e-commerce.

Three-and-a-half-year-old StreetDeal is one of the oldest in the local group-buying scene and the third largest here, after Groupon and Deal.com.sg.

Groupon is listed on the Nasdaq and Deal’s parent company, iBuy, raised A$37 million (S$42 million) in December on the Australian Securities Exchange.

Mr Gregory Costamagna, chief executive and co-founder of privately held StreetDeal, said that three months ago, the company started holding inventory and selling products on its site using the traditional e-commerce model.

Since then, its revenue has become an even split between its voucher business and e-commerce, indicating the keen reception here to online buying, he said.

Groupon, launched in 2008, was the pioneer of the group-buying craze. Its name, a portmanteau of “group” and “coupon”, explains its business model: it offers users items at bulk discount rates, as long as enough users had committed to a deal for the deal to go through.

Users buy vouchers and redeem the goods and services at the merchants later, while the voucher site takes a cut of the revenue from the merchant.

But as the tide turned away from vouchers, both Groupon and LivingSocial, the two largest sites globally, started selling goods on their sites as well.

StreetDeal operates in Singapore, Malaysia, Thailand, the Philippines and Indonesia and has about 1.1 million subscribers.

Mr Costamagna said he intends to continue having vouchers on the site because cheap deals draw users in. Many of these users end up spending money on the products once they are on the site, so having vouchers alongside the e-commerce play is complementary, he explained.

But the site may end up relying more on e-commerce as its bread and butter because the “Groupon” model is costly to upkeep.

“Finding merchants to participate is costly. I need staff on the ground to talk to spas and restaurants, and maintain that relationship,” Mr Costamagna said.

In Singapore, Groupon contenders like MediaCorp’s Mocca Perks, Hungrydeals by HungryGoWhere, JigoCity and Gobblerdeals.com by ComfortDelgro have all gone the way of the dodo.

Mocca Perks, JigoCity and Gobblerdeals were some that died in 2012.

Ms Elyn Ho, spokesman for NTUC Plus!, said the company’s BigDeal site has “evolved and is now a non-commercial business entity”. The website now lists the union’s activities and events instead.

While the gleam of voucher deals continues to fade, free coupons appear to be the next big thing.

In the United States, Groupon and LivingSocial dangle discount coupons on their sites in order to get users through the door.

Groupon has 26,000 free coupons covering retail outlets like Old Navy and Macy’s. LivingSocial has about 20,000 coupons, and includes retailers like Best Buy and Guess.

Last year, Google Offers, another Groupon clone, stopped selling pre-paid vouchers and moved to free coupons offering discounts on goods and services.