Innovative “group buying” sites offering bargains on everything from meals, to travel packages are catching on in Asia as companies harness the power of social media to influence consumer behavior.
International brands and local merchants alike are exploiting the business model, which offers attractive deals with a catch — they have to be purchased by a minimum number of consumers within a deadline.
The discount sites take out advertisements on Facebook and other portals, send out Twitter messages and e-mail blasts to their target market to promote particular deals.
Consumers in turn ask family members and friends to take up an offer — so that they can eat in a group or relax in a spa together — and at the end of a successful promotion, discount sites get a cut from the vendors.
“It is basically about creating experience for the user,” said Patrick Linden, chief executive of Singapore site deal.com.sg, who said his sales hit S$2 million (US$1.6 million) in February from just S$20,000 in May last year, its first month of operation.
“Basically, social media powers our business,” said the 30-year-old German entrepreneur, who claims to have more than 300,000 e-mail subscribers notified regularly about offers. “The whole viral marketing is enabled through social media.”
Financial services giant JPMorgan Chase & Co forecasts the Asia retail e-commerce market, excluding travel, to more than double from US$156 billion last year to US$323 billion in 2013.
According to the China Internet Network Information Center, there are nearly 20 million group-buying customers in China among the country’s 160 million e-commerce consumers.
“There is definitely an upward trend for social shopping,” said Elias Ghanem, Singapore-based general manager for Southeast Asia and India at payment solutions firm PayPal Inc.
“When you combine the notion of social shopping with group buying, you get a very powerful experience that has the potential to appeal to millions of consumers,” he added. “Many Asians are already connected with friends, family and colleagues on social networks, so it’s only natural that merchants of all sizes would follow them.”
On a recent weekday, three different sites in Singapore offered deals such as S$1 for a chicken burger, S$5 for a nail service and S$48 for a traditional Chinese medicine package — all just a fraction of normal costs.
Global discount coupon giant Groupon is expanding its presence in Asia, acquiring sites in Taiwan, Hong Kong, Singapore and Malaysia and has initiated a joint venture in China.
Groupon Singapore, formerly known as Beeconomic, says it has overtaken eBay Inc and Amazon.com Inc to become Singapore’s 17th most visited Web site with 150,000 hits per day.
“I think this is a very sustainable business,” said Groupon Singapore chief executive Karl Chong, a 29-year-old Australian.
The company offers exclusive deals from international merchants, such as fast-food chain Subway, ice-cream company Ben & Jerry’s Homemade Holdings, Inc and fashion retailer G2000.
A study by consumer research firm Nielsen, commissioned by PayPal, reported that Singapore’s online shopping market was worth S$1.1 billion last year and expected to reach S$4.4 billion by 2015.
In a city-state with only 5 million people, Nielsen says there were 1.2 million shoppers aged 18 and above with an average online spending per head of S$1,492 last year.