By the end of this calendar year, deal-of-the-day website Groupon will be South Africa’s biggest online retailer by revenue. This is according to Daniel Guasco, who along with Wayne Gosling is joint CEO of Groupon.
Guasco cannot provide the numbers to backup this fact. Will it be bigger than Kalahari.com, which along with several other companies in the Naspers e-commerce division turned over R5.7bn in the year to March? Guasco doesn’t do specifics, but argues that with five million ‘actively engaged’ customers, the site has the critical mass to drive massive turnover.
“What other e-commerce platform can sell 30 000 Ster Kinekor tickets in three hours?” he asks.
Perhaps Computicket on a good day.
“Our numbers are there to see – have a look at them.” Indeed. Recently 927 people bought tickets at 50% of the usual retail price to Cape Town-based Bugz Playpark; 79 people bought a R3 500 Acer notebook and 18 people had bought a 21-piece Royal Diamond Stainless Steel Cookware Set valued at R6 999 for the princely sum of R2 799.
GrouponSA is part of the listed US-based internet phenomenon which is to date the fastest internet company to reach a $1bn turnover. The business, whose name is a blend of ‘group’ and ‘coupon’, offers its online customers a product, service or travel special, at a discount to the conventional retail price.
The company was launched in Chicago in 2008 and has expanded into 48 countries. It reached SA last year after buying out local internet start-up Twangoo four months after it was launched. Twangoo was founded by Guasco and Gosling after they witnessed the phenomenal success of Groupon.
The way it works is a user registers on the site and daily specials – targeted to the user’s city and specific likes – are emailed to them. The offer is available for a brief window of time – from 24 hours to six days in the case of travel deals.
The deal is only confirmed once a critical mass of people have bought the offer. Groupon earns an undisclosed commission on each deal.
For product and service suppliers the value lies in the massive exposure they receive through the site – and it would appear – the massive uptake. Suppliers range from small beauticians, restaurants and hairdressers to national product suppliers like Nikon, Mango, Tom Tom and Philips.
KNR Flatrock, which distributes branded lifestyle and digital products has been a regular Groupon supplier for a year now. “We run deals at least once a month,” says Michal Kaczmarczyk group sales manager. “It’s a great platform for us to address areas where we have stock pressure, and to expose our brands to the masses.”
But what about the customers? A quick look at customer feedback website HelloPeter puts Groupon in the list of the top ten most complained about companies. “We have some challenges,” admits Guasco. Challenges around the quality of the product or service are being ironed out by a new quality assurance department, he says
The bigger complication lies in refunding customers for products or services that were defective in some way – for instance the restaurant has closed down or the product is broken. “Fraud has become a big problem and to manage this we need to get the product back before we refund a customer – they don’t always like this,” Guasco says.
The big – and unanswered question – is whether the daily deals business is sustainable. While Groupon is the leader in the market, new competitors like Daddy’s Deals run in conjunction with Kulula, are popping up all over.
Certainly the global company is not the tech darling it was. Like Facebook, the criticism about its business model has cost it dearly. The company was worth $13bn when it listed last November but now has a market capitalisation of $3bn.
The company is expanding its business model, says Gosling. “Deals will always be the core of our business, but we will add other services.” These include applications like location-based marketing and payment services such as one introduced in the US this week: a payments service which provides restaurants, salons, retailers and other local businesses with the ability to accept all credit card payments at a lower rate than other providers.
Arthur Goldstuck, CEO of internet research company World Wide Worx is also positive about the future of Groupon. “E-commerce in SA is growing at 30%/year and we have about 4m South Africans with the propensity to shop online. They are ready for the value proposition a Groupon offers.”