Bargain Dining with Online Group Coupons

There may be no such thing as a free lunch, but you can easily score a meal for half-off at a number of daily group-buying websites.

BY AIMEE WONG

any consumers in Taiwan, like those in other markets, are making use of coupons from group-buying websites to save money on their purchases including dining out. Basically, the websites offer discounts of half-off or more on products and services, including restaurants, salon and spa services, travel and hotel packages, local delicacies, and even electronics. But the catch is that the offers are only active for about 24 to 36 hours, and they only become valid if enough customers agree to the purchase. If the number of purchasers has not reached the minimum, the deal is off. The concept started very much as a type of social commerce, meaning e-commerce that harnesses the power of social networks. Eager customers would ask their friends to join them in making a purchase to increase the chance of getting a discount, and the deal would spread via word-of-mouth. But the popularity of these websites has increased to the point that the social part is unnecessary enough customers visit the websites on their own to trigger the offers. Theoretically, the concept offers a winwin situation for all parties involved. Customers can choose from a large variety of deals on goods and services, merchants get brand exposure, and the websites take a cut of the purchase price for each deal

sold. Its like the online version of the television shopping network, says Jerry Kuo, CEO of Groupon Taiwan. The recent popularity of these dailydeal websites means that shoppers in Taiwan have several platforms from which to choose. The main players:

Groupon Taiwan
www.groupon.com.tw The largest company in the field, Groupon Taiwan, underwent an initial public offering (IPO) in late 2011 and holds the leading market position both in Taiwan and worldwide, with operations in more than 500 markets in 45 nations. Launched in November 2008 in Chicago, the company quickly flour-

ished, expanding its properties to the point of attracting a 2010 buyout proposal from Google. Groupon quickly rejected the offer and countered by expanding on its own. It entered the Asian market in December 2010 with three website acquisitions, including Taiwanese social networking website Atlas Post ( ), at that point the largest contender in the market. Groupons customers seem to be willing to spend more money than customers from other websites, who seem to favor lower-priced deals in the NT$100200 range, says Peter Hsu, General Manager of Red Onion Steak ( ), which has partnered with Groupon on numerous occasions. They were very efficient. If we discuss a deal today, it could go live maybe next week.

GOMAJI
http://www.gomaji.com The second most popular website, and continually increasing its market share, is GOMAJI, which was founded in June 2010 and focuses on innovation and technology. Not only was it the first group-buying website in the Taiwan market to release iPhone and Android apps, but GOMAJI also offers partnering merchants a MyPad tablet for real-time coupon-code entry. While other opera-

Jerry Guo
photo : Groupon

january 2012 taiwan business topics

35

coupons Ta i w a n m a r k e t a r e 1 7 L I F E ( 1 7 P , www.17life.com); Lashou ( , t w. l a s h o u . c o m ) ; N u o m i ( , tw.nuomi.com); Jigocity (, www.jigocity.com.tw); 123 (123 , www.123.com.tw); 17shopping (http://17shopping.tw); and yam (, josho.yam.com).

Who are the users?

As with most e-commerce websites in Taiwan, female users make up the majority of customers. As a result, deals are generally catered to this audience, with most falling into the categories of restaurants, spa and salon services, and travel. Anita Chen, Managing Director of Park Strategies Taiwan, a U.S.-based lobbying firm, has used Groupon Taiwan to purchase restaurant meal vouchers. Usually the prices are a substantial discount from the usual prices, she says. Its a good way to try new restaurants for less money. I havent used other group-buying websites so I cant make any specific recommendations, but I think Groupon has a much wider range of deals than its competitors. For merchants especially small to medium-sized service-based businesses the benefits can also be substantial. The daily-deal websites enable them to utilize idle resources and gain marketing opportunities with no upfront cost. Companies with the greatest amount of idle resources restaurants, hotels, spas have nothing to lose by offering those empty seats or rooms at half price, which would otherwise be costing the business money. We dont think of merchants as our clients were a partnership, says Victor Chang, head of New Business Development at GOMAJI. We handle the marketing part, putting it on our website and making the upfront investments in time and technology. But once we get those 1,000 people into the restaurant, we hand it over to the merchants. We remind them that these are your customers theyre not our customers. If you give them excellent product and service, next time theyll come back and pay full price. But offering a daily deal on a groupbuying site has its challenges for merchants as well. Stories abound of small

Gomaji - Victor Chang

photo : Aimee Wong

tions require merchants to collect printedout e-mail verifications or keep a written record and send the information in at the end of the redemption period, delaying payment by as much as three months, GOMAJIs MyPad entry method means that merchants can simply read the code from the customers mobile phone, enter it into their MyPad, and receive payment within three days. For small businesses with limited operating capital, that speed is a big boon. Another tech advance is GOMAJIs mobile app (translation: Im Hungry), a feature that uses smart phones GPS capabilities to locate shops with smaller (20% off or so) instant discounts in close proximity to the user. Users can purchase the deal on their smart phones and immediately show the code in the restaurant to redeem the offer. If the voucher code is not redeemed within eight hours, it is automatically refunded. The system is perfect for times at the office when faced with the inevitable question: Where do we go to eat today? For merchants, offers an opportunity to give smaller discounts that still generate a profit. Yet another unique feature of GOMAJIs service is its colorful photo-filled magazine, featuring the more successful restaurant, hotel, and entertainment deals from the previous month. The magazines are sold at retail outlets including 7-Eleven and the Eslite and Kinokuniya bookstores. Its an additional endorsement opportunity for successful merchants at no additional cost. We ran parallel promotions at both Groupon and GOMAJI, but GOMAJI

was much more effective for us, says Steven Wu, CEO of Toscana Bakery, a European-style bakery specializing in artisanal breads and pastries. Not only did GOMAJI sell more vouchers, but its customers spanned a broader demographic and the company itself didnt take such a large cut of the sale price as commission.

Yahoo! Discount
http://tw.discount.yahoo.net/groupbuy.php But if you think group-buying offers are only for new or small businesses, think again. At Yahoo Discount (Yahoo ), past successful offers includes hotel rooms at The Regent Taipei and Silks Place Yilan, and food vouchers for Ding Xian 101, Dominos Pizza, and Silks Palace at the National Palace Museum. Although the company entered the groupbuying market late, with its first offer coming in May 2011, Yahoo arrives with abundant e-commerce experience and consumer behavior know-how. In addition, it can promote the business through its existing marketing channels such as its lifestyle platform, Yahoo! Lifestyle+ (Yahoo!+), which makes restaurant recommendations, and its blogging platform, Wretch.cc. After observing the existing groupbuying websites on the market, we discovered that there was still a portion of customers whose needs have yet to be met, says Eddie Tsai, Director of Yahoo! Kimo Discount+. We plan to release products that as of yet have been inaccessible to consumers, namely, brand-name products. Some other players in the

36

taiwan business topics january 2012

coupons

companies that were actually put out of business by the success of their groupbuying deal. They received such an influx of new customers that they were unable to keep up. Others have been forced to make adjustments. Red Onion Steak, for example, began splitting its lunch and dinner service into two seatings on weekends in order to serve more customers, and the restaurant now requires advance reservations to make sure they have enough ingredients on hand to meet the demand. Sometimes the restaurants available staff and materials simply arent sufficient. Because of the demand from the vouchers, I had to hire bakers to work overtime making additional breads and pastries, says Toscanas Steven Wu. Our bread isnt like that from other bakeries, which is made in a factory by machine. Its all artisan bread, handmade, so selling more means that many additional hours of work. Another risk for the merchants when using group-buying websites is that customers may come in only to redeem the voucher, with no intention to peruse other products or return at a later date. Peter Hsu at Red Onion Steak tries to head off this problem by giving customers a VIP card, good for 2-for-1 pricing on entrees, when they pay their bills. Hsus successful partnership with Groupon goes back to the Atlas Post days, and includes about 10 offers over a span of two years, each time selling two to three thousand vouchers. He especially prides himself on the U.S.-imported aged beef used in the restaurants Westerntype menu, which includes several cuts of steak, as well as German-style pork knuckle, grilled chicken, and fish. I have about a NT$250-280 base cost per customer, including the cost of rent, electricity, employee salaries, etc. But I pay that cost regardless of whether or not there are people at that table. Even with the group-buying deals and the VIP card offers, were still able to turn a profit just due to the sheer number of customers. New customers come because of the voucher, but then they want to come back again. Thats how you make money. But in order to do this, your restaurant must have good food and good service so they

will want to keep coming back. Toscana Bakery was started by Steven Wu, who was born and raised in Taiwan and then went to Nigeria as a young man to seek business opportunities, eventually building a prosperous bakery chain of over 60 stores. After 25 years and a successful business in Nigeria, last year he decided to return to Taiwan and try his hand in his own homeland. Steering away from traditional Taiwanese-style bread, he instead offers hand-baked Europeanstyle artisan bread and pastries, such as Toscanas signature sweet basil bread and custards. He imports ingredients and equipment from Europe and the United States, including an expensive German oven proudly displayed behind a glass window, allowing customers to view the entire baking and packaging process. Before the offer, on an average day our store sold 30-40 custards, but after that weve been selling 3,000 sixcount boxes, so about 18,000 custards per day. The difference between 40 and 18,000 is so huge no matter how low your margin is, you still turn a profit. On top of that, within 24 hours 3,000 more people know about your shop. I think of it as a marketing cost, says Hsu. Advertising can easily cost

more effective depending on a business goals, group-buying websites offer companies large-scale exposure with quick return. Moreover, the results are measurable, replicable, and can be easily evaluated for effectiveness. When using the Groupon model, its very easy to evaluate the performance of a deal. Merchants can see exactly how many people have purchased a voucher and will go to their store, says Jerry Kuo. But for traditional advertisements in magazines and newspapers, its difficult to say what kind of impact theyll have. You spend money to purchase the ad upfront, but you dont know what the return is; you dont know how many people will come to your store as a result of that one advertisement. Finally, group-buying websites offer companies an opportunity to try out fresh products or test the waters of a new market. Even large international companies with their own marketing departments may struggle to understand how a product may sell differently in Taiwan as compared with their home country. Taiwan is not a big country, but its a very unique place to do business, says Kuo. Some companies come to Taiwan thinking its very similar to China or Hong Kong, but Taiwan is different. Customer behavior and the industries themselves are all very different. So international companies can work with us to test products on the market and receive feedback very quickly.
Left, a Red Onion steak, and below, a selection of breads at Toscana.

photo : Aimee Wong

NT$50,000, but here I only need to spend NT$10,000 and 2,000 people will come try my food. Who wouldnt take that tradeoff? If you think of it in terms of trying to turn a profit from the offer itself, thats a problem. Then you start thinking about trying to lower the quality of your product. Though other forms of advertising could be equally or even

photo : Toscana

january 2012 taiwan business topics

37