Daniel Guasco


Groupon SA offers more than a budget deal

This article first appeared in Marklives. 

Groupon has moved away from its ‘deal-a-day’ group-buying business model that launched it onto the global and local market. Today, the site still offers deals to consumers but feels more like a marketplace.

Groupon logoOn an organisational level, the focus has shifted to becoming sustainable. The company has also announced its intention of becoming a service provider for local merchants by providing them with a tablet point-of-sale (POS) system, aimed at small- and medium-sized retail outlets, called Gnome (pronounced “Genome”), in addition to Breadcrumb, a POS system aimed at high-end restaurants.

Of course, all this data it’s collecting from merchants on consumer behaviour will feed back to its own customer-relationship management systems. This in turn will assist with the group’s aim to build customised deals for consumers.

South African operation

In South Africa, Groupon entered the market through the acquisition of local group-media buying site Twangoo, which was launched by Wayne Gosling and Daniel Guasco.

Groupon today (Thursday, 10 July 2014) announced that Guasco and Gosling are to step down from the company after their three-year lock-in terms expired. Emilian Popa is set to become the new country manager for Groupon South Africa.

MarkLives interviewed Guasco and Gosling at the end of May and we have decided to place the interview today in light of the changes announced by Groupon.

Massive scaling

In its two-year of operation, the local company saw massive scaling, says Guasco. It ended its first year in operation with 100 employees. By the end of year two, it would employ 200 people. In 2012, it spent R70 million on online advertising, making it one of the largest online advertisers in the country — something that assisted the company in building a database on five million consumers.

By the start of 2013, the organisation started focusing on setting proper processes and procedures in place. The liquidation of a key logistics supplier in December 2012 had dented the local business’s reputation, as did its failure to manage merchant clients overextending themselves, which resulted in poor service levels and negative customer experiences for consumers.

The SA company revisited its corporate structure, introduced new processes, cut spending and reduced staff numbers (to around 112 currently). It also refocused on key regions, dropping smaller cities such as East London, Nelspruit and Bloemfontein (for local deals, national deals are obviously accessible to countrywide), reducing its local city locations from 12 to nine.

Shifted focus

It shifted focus on improving consumer relationships by managing more closely merchant partners’ ability to deliver on consumer promises. In short, the business had to dramatically increase its value offering to clients, admits Guasco.

This meant fewer emails and a greater focus on personalisation plus the localisation of offers. Merchants now sign up to contracts that offer a short-term push, with follow-ups two months later, to allow them to manage volumes better. Deals are capped, based on merchant capacity.

The global organisation’s new merchant POS systems, currently being tested in the US, will also find its way to SA shores in due course.

Corporate journey

Through its corporate journey, the company has emerged from a group-buying website to become a local retail business, says Gosling. “We want to be everything to a merchant on the technology side, offering POS through to booking/reservation systems.”

Guasco says the company still gets push-back from traditional retailers, but notes there are few organisations that can move 50 000 units for a FMCG brand. The brand is responsible for ‘hundreds of millions’ worth in turnover every year and remains one of the biggest online retail businesses in the country.

It currently has 900 deals live at any given moment and adds between 40-50 new deals every day. The average basket size in the site can range from R400-R500. Product prices range from as low as R50 to as high as R50 000. The site has even offered deals on beds, which did surprisingly well, according to Gosling. Cruises are also proving wildly popular.

Entered the premium market

Groupon has also entered the premium market, with deals for higher end brands not running on the main site but emailed directly to select customers.

Gosling says the SA operation is in the black and that its international parent is happy with its progress. The local ecommerce space remains an exciting and viable one, adds Guasco, and Groupon will continue to play an important role in its growth.