The Group Buying Battleground in Singapore

For a small country like Singapore, it is surprising that we have 46 group buying websites with four already in the deadpool. The number of Groupon clones in Singapore is about twice the amount in Indonesia. It can’t be blamed: The astonishing revenue growth of group buying website compared to other traditional online businesses has attracted many to jump into the bandwagon.

The beauty of the group buying business can be summed up in these 5 points:

1. Simple technology
2. Holds no inventory risk
3. Getting commission up to 50%
4. Able to collect commission immediately without the need to give merchants 30 days credit term.
5. Low cost per account acquisition thanks to social media and friends recommendation to ensure a deal goes through

The simplicity of this model has resulted in spinoffs from big players like InSing, Mocca, CozyCot, HungryGoWhere, Reebonz and even retail giant, Courts.

On paper, these big boys definitely have the resources and database to easily trample over their smaller competitors. However, if you check their website you realize they don’t sell as much as their so-called smaller competitors. Here are several possible reasons why the big boys’ spinoffs are not doing as well as they should:

1. Lack of a dedicated sales team to bring in the deals
2. Passion and execution for the spinoff aren’t up to standard. The product person might have other products to focus on
3. Competitive rates from overwhelming group buying sites make the business less profitable as a whole

The low barrier of entry makes the market a tight place to hang around for long. Anyone can create a group buying website by just paying about USD 200 for the script and have it installed. What’s left is to do is to link up with the merchants for deals.

With so many group buying sites in Singapore, merchants and consumers are spoilt for choice. Instead of paying the big boys 40-50%, they can pay the smaller group buying site at a range of 10-15% and probably get the same effect.

This makes it harder to move beyond the low commission range as there will always be newcomers coming in to earn quick bucks. Thus spinoffs are unable to make a decent profit for the amount of resources they commit.

Singapore is not known to have so many dot com companies created in such a short while. But with the introduction of Groupon’s concept, many dot coms have sprung out from nowhere.

Some may hope LivingSocial will buy over them when they come into Asia. Some may hope to secure some funds to carry on the fight. While some might just enter the deadpool. It will be interesting to see how this competitive group buying industry will pan out in Singapore.