As far as my research takes me, the group buying model has to be one of the biggest shakeups to hit the e-commerce industry. Ever since its launch in 2008, Groupon has taken the techno-sphere by storm.<!–more–> In but a couple of years, this simple business has grown to a staggering valuation that IPO this spring to the tune <a href=”http://techcrunch.com/2011/01/13/groupon-said-to-be-valued-at-like-15-billion/”>$15 Billion</a>. If you haven’t noticed already, that is absolutely nuts! What is not surprising beyond this picture is the fact that everyone and their mothers have been taking a stab at building their very own group-buying site, especially in the Middle East. The culture of “let’s open a falafel shop right next to his falafel shop” is rather popular in our neck of the wood, but is there a real play for all these clones today?
We live in exciting times; companies are experiencing astronomical growth rates and international expansion like never before. It’s been reported that Groupon is setting up shop in the MENA region as well, so although clone group-buying is unlikely in my opinion, perhaps the right deal is just around the corner and an acquisition would take place. For those of you who are unfamiliar with the group-buying concept, it’s easy: Each day all the site subscribers are emailed a stupendous deal. It could be discounts on food, entertainment, places to stay, things to buy and so on. Although you may buy into a deal, it only becomes effective if a minimum amount of people buy it as well, otherwise it’ll be cancelled (which creates an immediate urge to share the deal with friends and family over the social web). From a business standpoint, higher sales volumes enable vendors to afford offering cheaper prices, and the website retains a percentage of every sale made – brilliant! In fact, it’s so brilliant that even Arabs are pulling out their credit cards and buying. Perhaps social commerce is our way into the e-commerce world after all.
Just to give you an idea of the number of startups in MENA whom have delved into the area, the <a href=”file:///C:/Users/IBAG/Downloads/thenextweb.com”>Next Web Middle East</a> has nicely wrapped up the lot of startups in the area and have identified which regions they operate in.
From what we’ve seen in the group-buying game, if these companies move quick they end up doing quite well on their own. Not being acquired by Groupon may not be the worst thing in the world, but the billion dollar question remains: <strong><em>Will this grow into a winner takes all market?</em></strong>
Frankly, I don’t think so. At least not in the same sense that auctions were years ago when eBay came in and took that market. In the case of social commerce today, there are no real technological edges and absolutely nothing standing in the way of a local vendor from using multiple platforms to showcase their offers. The Arab world is notorious for adopting brand names from outside of the region and relationships do matter (between site and its users from one end &amp; between site and its clients from the other), but will the majority of buyers not care about where they buy their deals online as long as they are good? That is a game that is yet to be uncovered.
I would expect a winner-takes-most scenario for this model within the respective regions of the world, and also on a global level. I say this because when any of the group buying businesses enters into a new market, there is a network effect that is very valuable. They usually start from scratch but make full use of an investment in its platform, which is partly the reason why a company like Groupon is able to raise so much capital and is racing to get into new cities before competition. The question is really whether fast followers will be able to grow mini-sites with a larger player firmly intact in their city. In fact, I would hope to see some innovation take place on the smaller and more agile companies’ parts – dropping dead would be the easy way out of that world. I just hope the Arabs behind them don’t give in that easily.