Let me give you a quick snapshot of this super fast growing coupon business based on what I heard here in the Japanese market.
• We currently estimate more than 200 Groupon-like sites/services available in Japan (including Groupon Japan). Yes, Japanese consumers love the deals!
• It was told that Groupon Japan, the largest player in this segment, sold more than $10 million worth of coupons in Dec 2010.
• Although travel is not a major category for most of the players, at least three or four companies focus on travel related deals including hotels (overnight stay), restaurants (in hotel) and other activities (in hotel) such as spa. (I don't see many deals for tour packages now.)
• Travel focused sites/services seem to capture their growth nicely as the Ikyu.com (hotel booking engine focusing on luxury hotels) doubled their transaction amount from Nov to Dec on their new Groupon-like service to become the #3 player in the market and the Tocoo.jp (another hotel booking engine focusing on low end hotels, onsen ryokans and b&bs) was positioned #6 player among the 200 competitors.
• Having heard of the hefty profit margin of Groupon and the alikes here (around 30%), it looks to me that this model so far fits in to the high end hotels, spas and restaurants whose margin is high and the low end, small, mom & pop hotels and b&bs who try hard to fill their rooms to their capacity.
• The biggest question right now is "Do the clients repeat?" (after their first deal), especially if they are the big names who care for the brand equity.
The challenge for any players in this market is to keep up the service/product quality to gain the users' trust while they try to outgrow their competitors – especially Groupon and Recruit.
Both companies are investing millions of dollars for marketing and recruiting in the short term in this incredibly competitive environment. Groupon was recently criticized heavily for the poor quality of food items delivered to the users. It was pretty big local news here and Andrew Mason, Groupon's CEO apologized on YouTube (below).
