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By Posted on Posted in Group Buying No Comments

Groupon investors were expecting a better deal than the surprise loss the company delivered on Wednesday. Personally I was not surprised because I never believed in this business format and its growth. Groupon Inc., which went public in November, makes money by taking a cut from the online deals it offers on a variety of goods and services.

Groupon’s net loss totaled $42.7 million, or 8 cents per share, for the final three months of 2011. A year earlier, as a private company, it booked a larger loss of $378.6 million, or $1.08 per share.

I was pessimistic since day 1 group buying sites starting picking up and filling inboxes with offers that most of them were not honored (mainly in Europe, such problems Groupon had in France), and some of the websites had empty pages without any offer,

I wrote about Group Buying & Global Recession, I also wondered What Value Can Groupon Add To Groceries?

You can read Daily Deals by the Numbers and take a look at this player who arrived late and some simple calculation.

For retail enthusiasts, you can also read Retail Renaissance from TrendWatching.com.



Groupon Stock Chart

By Posted on Posted in Economy, Group Buying No Comments

The global recession that started back in 2008 is still on and things does not look bright to many economies worldwide, an endless roller-coaster ride from the US to Europe does not seem to slow down anytime soon. Meanwhile a new online phenomenon developed and later on was known as “group buying“.

Was the “questionable” success and business model of group buying sites built at the expense of the recession and consumers who are spending less every day and are trying to cut on their average basket?

Before consumers can resume spending as in their previous lives, many of them must reset their balance sheets. How can US consumers keep spending when are they consumed by the economic pressures and it will take an average of 30 years to payoff what they owe on credit cards?

What if the global economy recovers, will these group buying sites be doomed?
Already lots of consumers entered the daily deals fatigue mode and it doesn’t always work for retailers and businesses financially?

Lately 2 major players went out of deals, Facebook and Yelp left the battle field and Groupon, the biggest player is experiencing a 50% traffic decline.

The recession also pushed a new type of business for the food and restaurants industry and its first players started to appear and this phenomena is called Social Dinner, Group Dining or Social Meals.
Grub With Us is already up and running and Social Dine is launching soon.

On a separate note, a monthly survey, conducted by IGD, has found that 29% of consumers in the UK are planning to switch their food shopping from their usual supermarket to hard-discounters, in a bid to cut down on their shopping bills in the middle of escalating inflation.

By Posted on Posted in Group Buying, Hypermarkets, Retail, Supermarkets No Comments

The news is out, yesterday Groupon started partnering with a grocery chain to start a test program. But what value can this kind of partnership bring to groceries, supermarket and hypermarkets?

In my opinion, it will not add any value.

Why? Because food retailers all over the world and in partnership with brands, are into the “group buying” business without declaring it with these words, way before Groupon and all the rest and without any minimum quantity restrictions.

Supermarkets and hypermarkets, on any given day, have an average of 100 promotions and discounted products on their shelves, websites, printed leaflets, …

Brand owners, depending on the category, fight every 7 or 14 days to find a free space in the catalog of a retailer and most of these leaflets are showing only promoted products, price discounted items, buy1get1, value packs, etc… the promotion formats can be endless as brand owners can be very creative to push their sales.

Not forgetting that also some food retailers, keep on always offering loyal consumers who are part of their loyalty programs, additional discounts and promotions, to make them feel more special.

No matter what kind of promotion format Groupon or other group buying sites will use or offer their consumers, but surely it going to be déjà vu, specially that some retailers also started showing a countdown clock for promotions on their websites.

By Posted on Posted in Google, Group Buying No Comments

After dangling a reported $6 billion offer in front of daily deal site Groupon (which it ultimately rejected), Google is pressing on with its own service. Google unveiled Offers, a new feature that will allow local businesses to show off deep discounts to consumers. Seemingly a direct competitor to Groupon and Living Social, Offers boasts of discounts of 50% off or more.

By Posted on Posted in Group Buying 1 Comment

I already posted about group buying not long time ago and I was wondering if I should post this, one more time, because I am still not getting this business model specially in the Middle East and North Africa region and how they are going to generate money.

Yesterday, I found a new player from my twitter timeline, called GoSawa, because curiosity killed the cat, I pointed my browser to the site.

On their “about us” page, you discover that they were established in January 2011 and “If it ain’t a good deal, it won’t be featured on our site – that simple.”, and since, they have closed only 2 deals in Beirut as follows:

1) Coconut Body Scrub & Relaxing Foot Reflexology Massage: US$25- x 18 bought = US$450-
2) $30 for $60 worth of Tattoo at Scream Body: US$30- x 6 bought = US$180-

So the total value of both deals is US$630- and considering their share is 50%, they ended up making US$315- since they launched, so that’s effectively US$3-/day (from 01/01/2011 till 15/04/2011).

I might sound very sarcastic doing these small calculations, but wondering how the owners of these sites are making money to cover expenses,… just saying.

One last word to group buying sites, stop using the same template, it seems you have lots of cash to burn, go spend some money and get a different design for your sites, you might end up distinguishing yourself from the crowd.

By Posted on Posted in ArabNet, E-commerce, Group Buying 1 Comment

Group buying was one of the interesting panels that took place at ArabNet Shift Digital Summit on 23rd of March, and it was moderated by Alexander McNabb.

The panelists where Sohrab Jahanbani from Gonabit, Sinan Khatib from BuyWithMe, Paul Kenny from Cobone, Brendan Ogilvy from Effective Measure, and an Egyptian guy from a group buying company located in Cairo, but i am really sorry for not remembering nor his name, neither his company name (help needed). Unfortunately the Groupon people did not show up at the summit, if someone knows the reason, please share it with us.

There was a rumor going around, that Groupon will show up at the ArabNet and announce their acquisition for a local group buying company, well, it seems that this will stay a rumor.

Alexander mentioned during the panel that there are around 25 group buying companies serving the region (Middle East and North Africa), and this number looked very BIG to me, after hearing many panels describing the e-commerce situation in this same region unless these group buying sites will start promoting their offers offline in order to attract potential future clients.

Alexander McNabb | Group Account Director, SpotOnPR
Alex has worked with IT, media and communications in the ME for over 24 years. He has developed marketing strategies and communications programs for leading global brands, done consulting work with Arab governments, and built strategies and managed national and regional communications campaigns.

It takes lots of time and efforts to find the appropriate services to satisfy the deal seekers, and sometimes it is very hard to convince the businesses to participate in such promotions.

Yesterday evening I was having a discussion with my wife and I mentioned to her about these group buying sites popping up everyday that she should check, maybe she might be interested in something, knowing that she is not an online buyer, actually she never bought anything online but I wanted to check on her reaction once she visits the sites. And just for the record, she said that Gonabit sounded the easiest name to remember.

Personally I am a heavy online buyer, but never from group buying sites, so this morning, I have decided to check these sites to see what offers they are running and the first 2 sites I visited were Gonabit.com and Cobone.com and I was shocked !!!

Last week, during ArabNet, I had a side discussion with a friend, who was and is monitoring the group buying business in the region, so he summed up his point of view about this phenomenon, saying: “this is not a profitable business”, of course he backed up his argument with some simple figures to defend his case.

And my morning surprise made me totally understand my friend’s point of view more after seeing the available offers on both sites and this, from a business perspective.

Cobone is offering a bike ride in Beirut for $1.66-, so let us say the deal is on, and they sell 10 deals, or 20 deals or even 100 deals, the total cash out of this operation is $166.00- and let us also say the split is 50/50 between the site and the shop, so each one gets $83.00- >IF< 100 deals are sold.
Same exercise for Gonabit who is offering an online live footbal game for $7.50-.
(By the time I was writing this post, around midnight, Cobone had 12 deals sold and Gonabit just 1).

From this simple calculation, I am trying to understand how these site will get profitable on the long run with their operational cost and how they will manage to cover these costs.

Is this the investors money that is getting burned?

Or maybe we are observing a new internet bubble like the one we had in 2000 and for those who don’t remember how things went bad in the US, few examples to refresh your memory, Boo.com spent $188 million in just 6 months in attempt to create a global fashion store. Pets.com raised $82.5 million in an IPO only to go bankrupt nine months later.

The biggest dot-com company that crashed and burned was WebVan. The company aimed to deliver groceries to homes and businesses. It raised $375 million in an IPO. WebVan forgot that it was actually in the grocery business, which has razor thin margins to begin with. In a mere 18 months the company had spent itself to bankruptcy.

If someone from the group buying industry is reading this blog post, I appreciate explaining your business model, so we can get it, again from business and profitability perspective, and hoping you are not sitting in HermanMiller Aeron Chairs.