The concept of online social or group buying debuted on the World Wide Web in November 2008 in Chicago, with the birth of the American site Groupon. Two years on, Groupon covers hundreds of cities all over the world and the venerable Wall Street Journal singled it as the company likely to make its first $1 billion faster than any other business ever.
The meteoric success of Groupon has not escaped the attention of start-ups in the relatively tiny ecommerce space of South African ecommerce. The first local group buying sites started appearing in 2010: Twangoo, WiCount, Justhenga, EishCoupon. Very soon, the concept spread like fire. And at the beginning of 2011, everyone in the country seems eager to jump onto the bandwagon and get a piece of the action.
Recently, the local online marketplace and auction site bidorbuy.co.za acquired group buying site Ubuntu Deal for an undisclosed sum. Several days prior to that, another site, Zappon, was launched by the local media giant, Avusa. And earlier still, in January 2011, Twangoo, one of the oldest local group buying sites, was bought by the American giant Groupon, to trade under the new name, MyCityDeals. Far from intimidating local wannabes, Groupon’s entry into the South African market seems to have sparked renewed interest in the field, especially by entities that command a large audience of internet users.
All in all, there are currently about twenty group buying sites in South Africa. The majority of them feature discounted deals for restaurant meals, spa and beauty treatments, accommodation, etc., though some specialise in products, mostly consumer electronics.
Besides the already mentioned Twangoo/MyCityDeal, WiCount, Justhenga, EishCoupon, UbuntuDeal and Zappon, other South African group buying sites include: 24hoursonly, CollectiveCow, Dealio, OneDayOnly, OpenDeal, SaleWine, Skoop, UCit, CitySlicker, YouDeal, Bangoo, VuvuPlaza... plus new ones that seem to be sprouting every day. There are currently two group buying aggregators, alldeals.co.za and todaysdeals.co.za.
Group buying is not a new concept, but internet has breathed new life into it. It basically works like this. A company, often a local small business, offers a product or service at a discount for a limited time, sometimes only one day. The deal is on if a certain, publicly stated number of users commit to purchase. If not – the deal is off.
Presumably, consumers who are after a specific service or product will promote the deal, urging their friends on social sites like Facebook to buy into it and thus make it available. And with almost four million Facebook users in South Africa – who would not want to tap into such a market! Especially since everyone is saying that the digital word of mouth is nowadays worth more that good ranking in a search results page.
So, it appears like an all-round win-win situation. Merchants get great marketing. Consumers get great deals. The hosting site gets its share from the merchant – and everybody is happy.
However, it’s not all rosy in the world of digital coupon-cutting. There can be pitfalls for all three parties involved.
First, let’s consider the merchants. It is true that being part of an online social buying deal can be an excellent way for small businesses to market themselves and gain new customers – but only if they are ready for it. Unprepared businesses can run the risk of losing money on deals they price too low. Even worse, they can damage their reputation by overselling and/or underperforming.
As for consumers, some ecommerce watchers claim that they fare better than merchants. However, more than one consumer has complained bitterly all over the World Wide Web about this or that group buying deal. Some were denied the special, while others suffered poor service or were made to feel like a second-class customer.
The businesses that act as a meeting place for merchants and consumers have problems of their own. Online group buying may seem like an easy business model. All one needs to do is set up a web site, convince a few local merchants to offer pizzas or haircuts at half-price, and then watch the cash roll in. The businesses, however, quickly learn that building a profitable group buying site requires a critical mass of users – and that getting people to come to the site may cost a fortune.
This field being relatively new in South Africa, the standards of some of the group buying sites (as well as of participating merchants) are sometimes still wanting. Several South African bloggers have pointed out an array of weaknesses that include artificial price hikes, discrepancies between the deals as presented on the site and in “real life”, poor web development and design, and even, in at least one case, accidental release of the names and email address of customers.
It is expected that the quality of local group buying sites will rise as competition heats up and the weakest links fall off. In all probability, only those that are able to offer really good deals and reach the widest audience will remain – to unmitigated joy of South African internet users, who have taken to group buying like fish to water.
