Of Relevance

I’ve been watching closely the Groupon and Groupon-like sites that have recently launched in SA. (Mostly, that’s because I am going to be launching one myself soon, but with a twist. More on that at a later date.)

So there are about 9 sites worth following in this genre (I have set up a daily list of all the deals available on one page on www.TodaysDeals.co.za. Please visit!). And they all offer pretty good deals, but I am still not convinced that this model is going to work here in South Africa.

Having monitored the deals for the past week or so, I have noticed a trend: hair treatments, manicures, pedicures and massages are the most popular. Which is great for me as a consumer, because I enjoy getting up to 60% off. But the thing is, I will never pay full price for any of those again. (Well, maybe the hair treatment I will, since I have a favourite hairdresser).

I am not exactly sure of the business model behind the local sites, but in the US the retailer offers a 50% discount, AND gives half his revenue to Groupon. So in effect, the retailer gets 25% of the full price. There are strong arguments why this is still a worthwhile deal for the retailer – for instance, he is introducing his business to a new customer base, he can upsell, get repeat business etc etc.

I am just not sure whether this applies to South Africa. Getting a discount at Codfather is great, but most people who buy the voucher will already know about Codfather. They are not going to be new customers. And getting 60% off a manicure is also cool, but probably won’t result in repeat business because the buyer will wait for another “deal” so she doesn’t have to pay full price.

Then there is the problem of apathy. We as consumers are being spoilt for deals, and know that a new one is just around the corner. So if we don’t buy that spa voucher *today*, it ok since we can buy one next week from one of the many sites offering them.

Also, 9 sites is a bit of an overkill, and I am sure some will be exiting the market this year. I think it’s a lot off work to pull this off, and you need a strong sales team (Groupon USA’s main advantage over its competitors is its vast sales force). Sales teams are notoriously difficult to put together, and even harder to manage.

Having said all that, the sites are still in business, and a lot of the deals are “closing”. Elan from Avusa/Zappon recently tweeted that Zappon made R130,000 in revenue in its first seven days. That’s not bad (but included “in-house” deals like Sunday Times subscriptions and R50 for R200-vouchers from Exclusive Books). Just don’t expect any of the sites to be worth gazillions, like Groupon US is.

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