Asia’s daily deals industry jumps the shark, but could see Rocky Balboa moment

A customer at a Groupon Singapore concept store. Photo: Groupon

In Asia, the daily deals industry is apparently in the doldrums. In an analysis done by Groupon Singapore, only 19 group buying companies now remain, down from a peak of 72 in 2010 and 39 in 2011. 84% of these companies lasted less than a year.

SGE has even covered the demise of a couple of these websites: Outlet.com.sg and Mocca Perks.

The downward spiral in Singapore dovetails with the predominant trend in Asia and the world: Group buying sites are shutting down en masse. In the second half of 2011 alone, Daily Deals Media reported that 1,348 such companies have gone under. While some group buying sites have been acquired, they are in the minority.

Groupon’s share price, meanwhile, has tumbled to USD 5.25 per share on 6 October from a high of USD 31, despite a profitable quarter. Another American daily deals company, JigoCity (acquired by the owner of porn magazine Penthouse), is also finding the waters choppy in Asia: It recently left Singapore, Hong Kong, Malaysia, and Australia.

But just like how the movie Rocky Balboa became a surprise hit in the face of doubts in 2006 — 16 years after the disappointing last film — Asia’s daily deals sites are reinventing themselves to stay in the fight.

Entrepreneurial spirit stays alive at Groupon

Leading the charge in Southeast Asia are Groupon’s young country CEOs, whose companies were acquired during the daily deals giant’s rapid expansion phase. Flush with funds and support from their parent company, these entrepreneurs have continued to stay nimble.

“It is imperative for companies in the group buying space to continuously rethink and relook their business models to address the changing needs of both merchants and consumers,” said Karl Chong, CEO of Groupon Singapore. Together with his brother Chris Chong, he sold Beeconomic to the daily deals giant for a reported USD 24M in 2010.

Besides creating a mobile app, Groupon Singapore has ventured into the retail space. They launched a store in Suntec City, a shopping mall in the heart of Singapore. That is a first for Groupon worldwide. Shoppers can purchase deals through one of the computer terminals at the store and then redeem their items on the spot.

In Indonesia, Ferry Tenka, CEO of Groupon Disdus, is diversifying his business. Instead of merely acting as a referrer for merchants, they now operate their own online retail store and hold their own inventory. While the business model is different, they are targeting the same consumers with all sorts of products at deeply discounted prices.

Now, half of the company’s revenue comes from selling products. It claims that out of its 1.2 million subscribers, 30% to 40% of them have purchased from its online store.

About 1,000 to 2,000 products are shipped throughout the country daily. “That’s what companies in Indonesia typically ship in a month,” he told SGE during an interview at the East Ventures office in Jakarta. East Ventures, an early stage VC firm, had invested seed funding in Disdus.

It clearly believes in the potential of the company and its leader.