Group buying in Singapore: more than just a fad?

There are over 40 group buying websites in Singapore, including Deal, Groupon, InSing and Big Deal, offering daily deals from merchants of different industries.

But while merchants may get attract more customers with such deals, it may not guarantee high profits. Group coupon sites typically get merchants to reduce their prices by 50 to 90 per cent, while at the same time getting a commission of up to 50 per cent.

The question is, if the business is sustainable, especially when consumers have started complaining that the deals aren’t as good as they had been advertised?

Alrick Dorett, COO at TBWA\ Singapore, says that despite Groupon’s substantial first mover advantage and brand recognition, the nature of the service is that it can’t enjoy that benefit for long.

“In fact, I think the benefit is already evaporating. Group buying sites have a very low barrier to entry, which means copycats can enter the market with ease, while the technology isn’t complicated,” he told Campaign.

While some startups did not enter into the group coupon websites industry as early as Groupon, there has been a slew of copycats in every strong internet market, he noted.

“We’re starting to now see smarter convergences in a new wave of entrants: combining group buying with location-based platforms like Foursquare and Facebook Places. This seemed like the obvious next step right from the start. I suspect that as other mass-platforms integrate location-based technology, a group-buying component or partnership will be considered,” he added.

Citing Google as an example,Dorret says Google+ gives it a renewed opportunity to leverage its Google Deals in both its Android OS and iPhone.

However, many consumers feel the regularity of daily or weekly deals has become spam, and that the pace of the offers is fast.

Dorett says the only way he sees these group coupon websites sustaining or growing more profitable is by integrating the deal into a purchasing or retail context.

“In other words, group-buying deals get better at using contextual platforms like Foursquare. A consumer checks in into Starbucks and gets offered any coffee deals in that store and related lifestyle deals.  That way the consumer is less overwhelmed and they have a well-timed choice instead an overflowing inbox of unread deals."

From a business’s point of view, Dorett says offering a discount to a fast and responsive network of price sensitive consumers is rarely a bad thing. "But certainly, no one can discount too often. I believe businesses that see new customers come from a group buying promotion may return to launch new ranges, products and limited edition offers. So there is return business, certainly – it’s just not the feeding frenzy everyone predicted.”