The group-buying industry has grown tremendously since it set foot here in Malaysia in about 2010. Then come 2011, which saw the boom of the group-buying industry with the major player worldwide, Groupon, buying a Malaysian group-buying site, Groupsmore, which holds almost the similar name. With that, the industry simply flourished with many more group-buying companies popping out like mushroom after a rain.
But looking back over the year 2011, did the group-buying industry brought good? Or did it caused more harm than good? Why not I slowly take a look at it from the various angles involved. As I had worked in this industry before, I have some experience and understanding of this slightly insane industry. Thus, this is merely my own opinion and how I would see group-buying from my own eyes, but I do my best to see in various angles.
First off, I shall take a look from the group-buying companies point of view. For them, the flourishing industry paved way for them to approach more merchants of different services and products. Which in turn slowly allowed them to reach the bigger names in striking up some really good deals. For them, it is certainly beneficial for them as they would like to get as many deals to be featured on their site each and everyday. This certainly allows them to put up deals on their website each and every day.
During the beginning, these group-buying sites would tie down the merchant from doing any deals with other competing sites for a maximum period of 6 months, but with an average period of 3 months. However, some group-buying sites would later take off this term, just to attain the merchants’ signature on the agreement. Many of the merchants would adhere to this term, but there are a few who would blatantly ignore this term and allow themselves to be featured across the board on various sites. Well, to me that is slightly irresponsible as it just damages the group-buying sites’ ability to sell the deal for them. But there are certain deal sites that would react very explosively towards having their merchants be featured on competing websites during the same time as they feature them.
And how does this group buying sites work and earn their money? Well, it is a pretty simple concept, which many new merchants are still quite unfamiliar with. First, the group-buying site would request that the merchant provides a discount for their food, drinks, products or even services. After giving a discounted price to the group-buying sites, they, the sites would then take a percentage off the discounted price as a fee. Of course, the selling that there is no upfront cost involved (which is true) and the fee collected by the group-buying sites are based on their success in selling the deal or the discounted price of the product / services provided. From this, the group-buying sites could earn quite a fair amount of money.
Now, I am sure that there are some who are curious as to how much is the percentage that they take? Well, it varies from merchant to merchant and dependent on which group-buying site is featuring them. As far as I have heard, the sites would take up to 50% of the discounted price that the merchants are offering. This is considered as a big sum for the merchants to take on, after giving such a heavy discount on their products and services. Could the merchants be running at a lost each time the deal runs? Well, I believe that some of the merchants do run at a lost as they are desperate to get people to know them. But we shall go more in-depth when I talk from the merchants’ point of view later.
I also realize that there are a number of group-buying sites that invests heavily in their marketing and advertising especially on the Google Adwords and the Facebook Ads avenue. This certainly drains a huge amount of money as it could cost the group-buying sites up to a few thousand US Dollar a day in terms of investment. I can’t deny the fact that this is heavily necessary for the smaller group-buying sites as they lack the database that the bigger group-buying sites has gained due to their early entry. With a larger database, the group-buying sites could push for the email marketing, that proves to be quite positive especially for Groupon Malaysia as they aggressively send out emails for the various that are running on their site. What more, they have segregated their email marketing into different categories, which I believe is their key towards selling without investing much into marketing. With their database of more than 1 million people, which is comparable to Everyday.com.my, which is now Living Social (the competitor to Groupon in many countries), who also has a database of more than 1 million people, these two giants do not need to invest much for their Facebook and Google advertising.
Now looking at the industry from the sites point of view, there are too many competitors around, and it is a matter of time before the big companies would start crowding out the smaller ones (or so I hope), but from what I can see, there seems to be a major war between the 2 biggest group-buying sites, Groupon Malaysia and Living Social Malaysia (well these are the two largest in my opinion, as they are well established in various countries, and in Malaysia, they are heavily backed internationally). Though I could not confirm it, but as far as I can observe, they are churning out deals like a water tap left on, and seemingly drowning consumers with irresistible deals that keeps consumers keep on spending loads of money which sometimes they may not necessarily have (so it kinda questions whether consumers save money or spend more instead when buying these deals?).
Now why would there be a need for so many group-buying sites? When only the top 2 or maybe the top few are the necessary to help consumers altogether? Well, that is something I have to wait and see. Would this top 2 in this industry proceed towards overwhelming the rest under them? Or would the 2 battle it out leaving those under them to fight it out among themselves, before they die out.
Nonetheless, the group-buying sites are here to stay in Malaysia.