theolynn

Is Ireland ready for Groupon? Online collective buying on the Emerald Isle

In Boards Deals, Business Education, Business Models, BuyWithMe, Collective Buying, Digital Marketing, Dublin City University, E-commerce, Group Buying, Groupon, ICAP Media, Ireland, LivingSocial, MyCityDeal, O2 Treats, Pigsback, StealTheDeal, Uncategorized, VaVaVouch, Wowcher on September 8, 2010 at 5:35 pm

In February this year, a group of us looked at setting up a groupon clone for the Irish market. Following some research, we established that there were opportunities for an online collective buying and group discount service, but as a group we weren’t the ones to exploit them – or at least, not together. Notwithstanding this, the experience offered some valuable insights in to the collective buying model and the importance of immediacy and relevancy, some of which I will share here.

Tuangou is a chinese word that roughly translates as “group buying” or “store mobbing” and relates to the phenomenon of groups of Chinese shoppers congregating at once at a store and haggling for a group discount. A consumer-driven flash mob. (Check out Paula C’s presentation on SlideShare for a brief history of online group buying)

Mercata - A First Generation Collective Buying Site

Mercata - A First Generation Collective Buying Site

The first phase of online group buying sites emerged in the dotcom boom but failed for a variety of reasons:

  • it takes time to organise buying groups
  • discounts needed to be exclusive
  • people needed to have accessible social networks
Groupon - the Second Generation Collective Buying Category Leader

Groupon - the Second Generation Collective Buying Category Leader

The second generation of group buying sites addressed these issues by introducing immediacy and relevancy. Sites, led by Groupon, created demand by building a business model based on immediacy and relevancy. They offered deep, exclusive, time-based collective discounts targetting specific segments and narrow geographic areas. For example, 68% of Groupon’s users were in the 18-34 age bracket, highly education (80% had graduated from university), single (55%) and women (77%). The offers were focussed on large  urban areas. Buywithme has similar demographics – young educated professional women. Discounts were targetted (e.g. dining, health and beauty, fitness etc) deep (50%-75%), exclusive and were only activated if a minimum number of subscribers took up the deal. Typically only 1-2 group discounts offered per day. If a certain number of people sign up for the offer, then the deal becomes available to all; if the predetermined minimum is not met, no one gets the deal that day. The intermediary, Groupon, markets the deal and assures that the deal will happen receiving a commission, on average 22%, from the merchant.  The deals are truly viral – they are extremely spreadworthy due to the heavy discounts and restricted timeframe for decisions. Email, SMS and social networking enabled groups of friends to form groups quickly to ensure the deal happened.  This is a great business model – everybody is happy.

Vendors Customers
  • Guaranteed quantity of customers
  • Fast customer base acquisition
  • Low-cost, low-risk positive exposure
  • High word-of-mouth referral rates
  • High rate of repeat business
  • Deeper discounts than usual
  • Shared experience and membership of a social network
  • Unique offers

The key challenges for the broker, the Groupon clone, is to recruit subscribers and merchants. Subscribers are not that easy – the business model hinges on registration of not only the user details but also their credit card. Merchants are somewhat easier particularly if they are in businesses that may have excess capacity to fill and a cost base that allows deep discounts. What does a deal look like? Here are some examples with the minimum number to activate the deal and actual deal take-up in brackets:

  • $20 Paintball Outing With Randolf Paintball [20/759]
  • Truffle Workshop at Taste of Chocolate [45/1,114]
  • $24 for 24 day pass to drop-in classes at Healthworks fitness [24/3,997]
  • $10 for $20 Worth of Vintage Threads, Costumes, and New Clothes From The Garment District [10/1,334]
  • $35 for $70 Worth of Nutritious Pre-Assembled Meal Kits From Healthy Habits Kitchen [35/815]
  • $30 for a Sushi-Making Class at Sea to You Sushi [30/2,200]
  • $49 for One-Month Membership and One Beginners Class at MetroRock Indoor Climbing [49/1,162]
  • $49 for a Haircut, Blow Dry, and $60 Toward Any Waxing or Skin Services at Amaci Salon [20/2,465]
  • $20 for One-Month Membership and Two Personal Training Sessions at Fitcorp ($189 Value) [20/699]
  • $20 for $50 Worth of Italian Cuisine and Drinks at G’Vanni’s Ristorante [20/2,456]
  • $35 for $75 Worth of Steakhouse Cuisine at the Oak Room [20/943]
  • $20 for $50 Worth of Italian Cuisine and Drinks at G’Vanni’s Ristorante [30/1,248]
  • $20 Football Ticket to Boston College vs. North Carolina on November 21 ($37 Value) [15/862]
  • $30 for a Regular Membership to The Brattle Theatre, Plus Three Bonus Tickets ($104 Value) [45/2,000]
  • $15 for $30 Worth of Casual Fine Cuisine and Cocktails at 88 Wharf Riverfront Grill [149/706]
  • $45 for Lift Ticket at Bretton Woods Ski Area ($74 Value)  [45/2,000]
  • $149 Getaway to the Omni Mount Washington Resort [149/706]
  • $15 for $30 of Tasty Tapas and Cocktails at Tasca [15/2,067]
  • $40 for Acupuncture, Personal Training, or Massage at Joint Ventures (Up to $115 Value) [40/887]

As you can see these deals can be very successful bring in several thousand dollars worth of business. Obviously some businesses work better than others. For example, meal deals work because they are low value amount and groups of people can easily agree to go to one location and therefore subscribe to a deal. I also think there is a lot of value for multi-site retail chains however only if they have barcode or other technologies to manage duplicate submissions in real time or near real-time to avoid the same coupon being submitted in two geographically-disparate stores.

Groupon Dublin Facebook Page

Groupon Dublin Facebook Page

So what about Ireland? Well, Groupon has a Facebook site for Ireland and has acquired MyCityDeal but there doesn’t seem to have been a real push and LivingSocial has been “coming to Dublin” for a number of months.

VaVaVouch - An Irish Collective Buying Site

VaVaVouch - An Irish Collective Buying Site

Vavavouch is a local website but doesn’t seem to have gained much traction and I frankly have not heard much lately about Boards Deals. Is it that Irish people just aren’t interested?

Boards Deals - an Irish Collective Buying Site

Boards Deals - another Irish Collective Buying Site using the boards.ie brand

We surveyed 83 people earlier this year. The respondents were largely female (76%), university educated or some other professional qualifation (85%) and aged between 22 and 34 (76%) – a pretty good sample relative to the US sites. Most (75%) go out to restaurants, bars, events or other social activities at least once a week and spend over €50 on a typical night out (63%). However, only 2 people were familiar with group buying sites and this is the crux of the matter – people simply don’t know about these sites and how the operate.The overwhelming majority of respondents have never heard of Groupon, Wowcher, LivingSocial, BuyWithMe or StealtheDeal. Pigsback had good brand awareness ratings with over 76% of respondents but that is a different business model altogether. It would seem in Ireland collective buying may be a matter of ignorance and not disinterest.

So are they interested? Well, we asked. Firstly, the respondents did use coupons and vouchers – over 35% in the previous 6 months and over 56% had a supermarket or retail store loyalty card. So they do use discount cards and vouchers. When we explained what group buying sites are and how they operated, over 58% said they would consider using these sites. On what?

  1. Restaurants and bars (81.4%)
  2. Concerts (51.4%)
  3. Local retail (47.1%)
  4. Movie Tickets (45.7%)
  5. Spas, Salons and Assorted Pampering (37.1%)
  6. Trips: B&B, Skiing, etc (37.1%)
  7. Events (24.3%)
  8. Tours and Sightseeing (15.7%)
  9. Theater (14.3%)
  10. Lessons and Classes (11.4%)

Interestingly, 46.5% of respondents have received a coupon, voucher or other discount offer via their mobile phone however only 8.5% had used the mobile phone coupon/voucher in the previous 6 months.

Basically, it seems to me that Irish people are interested in group buying, or at least our respondents were, but the group buying sites need to promote their sites and educate customers a lot more. Certainly Facebook and Twitter are much pervasive and this will allow spreadworthy messages to go viral particularly in these more economically-straightened times. Whether the time-dependent deals will take off is another matter.

O2 Treats - a partnership between O2 and ICAP Media

O2 Treats - a partnership between O2 and ICAP Media

Broadcast discount services like O2 Treats seem much more likely to be successful given the high mobile phone penetration, high SMS usage (and ease of spreading messages via SMS), the location-based targeting capability, and the relatively conditionless exchange. Even at an 8.5% adoption, this would generate significant sales for merchants, value for users while generating high revenues for the service provider.  Good news for ICAP Media!

So what about our little startup? Well, we developed the spec, had a catchy (if somewhat quirky name) and had identified a company in the Far East who could develop the site and back office functionality fairly cheaply but…unfortunately too many cooks or maybe too many Indians and no real Chief. Or maybe if it was so easy for us to enter the market then it will just be too much hassle to defend over time.

Irish Blogs

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  1. Hi Theo,
    I believe the segment will definitely grow in Ireland, but like everything else here, will take a bit longer…
    Not sure an indigenous brand of which there were over ten at last count can compete against the well capitalized international companies like Groupon and Living Social, but in saying that Living Social’s delayed started for no apparent reason, has being interesting given the speed at which they entered other markets in the first six months of the year. I do know however that Groupon just completed a recruitment round here, so it may just be a matter of timing.
    I think that there is big opportunity for brands to offer their own group buying deals on platforms such as facebook and companies like http://www.wildfireapp.com are pioneering some interesting applications in this regard.
    Interesting research observations though and similar to the findings in our practicum, which is worth a read 🙂
    Barry.

    • Hi Barry

      I didn’t get to read or see your practicum but I will try and do so over the coming months.

      I think you make some valid points. I don’t disagree that it will take longer or that Facebook and other platforms may prove to be a much better base from which to launch such services efficiently and with less risk. I also think this is a multi-platform phenomenon and so I am interested in how ICAP Media is developing (a) a partnership model with both merchants and intermediaries like O2 and (b) how they and other exploit the various emerging pathways – SMS, MMS, Email, Voice, Content, Mobile and conventional Internet, Bluetooth, and Apps.

      rgds

      theo

  2. O2&Vodafone both pushing theirs via tv spots. Compare that to CityDeal’s targeted Adwords and Facebook campaigns. The networks can swallow those costs but would they pursue such an expensive acquisition/marketing strategy if they didn’t see growth?

    Pigsback also on the group bandwagon.  

    Re: Wildfire apps. Do they allow businesses to sidestep Facebook’s rules on running promo campaigns?

  3. Just thought I’d share this e-mail from GrouponWorks in case you didn’t see it:

    ————–

    Hi,

    We are really excited to announce a new feature available to help make the Groupon redemption process easier. We now offer a mobile redemption application for the Android and iPhone to businesses to help track Groupon redemption.

    The phone application, which is linked to the online redemption solution Groupon offers, will allow you to scan Groupons (or type in the barcode number) to see if they are valid and remove them from your list. This will cut down on paper at the point of sale, as well as a lot of the administrative work that we’ve heard many business owners tell us can become difficult with the number of new customers sent their way. This solution, which we tested with a number of merchants, has been great for those who don’t want to have to upgrade to a new point-of-sale system and for those with multiple locations.

    The applications are free for download. If you do not have an iPhone or a Droid, we have them available for lease. Contact your account representative if you want more information, or click here to get the application.

    Have any other questions? Email us at grouponworks@groupon.com.

    We are always working on new tools to help our business partners manage Groupon influx. One of these tools is to help manage appointments and reservations. If your business accepts appointments or reservations, please fill out this survey. Your feedback will help us design more useful tools in the future.

    Thanks,

    Your friends at Groupon

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