In December, the company that offers online coupons for discounts at restaurants, shops and other services of local companies acquired daily deal sites in Singapore, Hong Kong, Philippines and Taiwan.

Rob Solomon, COO, said, “We see enormous potential in the Asian marketplace, and the expansion of Groupon to Hong Kong, Singapore, the Philippines and Taiwan is an important next step.”

Groupon acquired deal sites Beeconomic in Singapore anduBuyibuy in Hong Kong, while in Taiwan, it acquiredAtlastpost, a location-based social networking site that has about 1.2 million users.

The Groupon model, launched in 2008, has stirred up much interest and there is talk of it going public and seeking to raise US$15 billion through the IPO, according to a report in Mashable. It rejected a bid by Google to buy it for US$6 billion.

One thing’s for sure, its entry will fire up an already competitive space.

Said Siva Ganeshanandan, vice president-Asia Pacific of Autonomy Optimost, said, “This space is unsustainably overcrowded at the moment with a large number of companies doing pretty much the same thing. It’s a matter of time to see which ones go bust, which global ones pull our of specific markets, and who buys who, over the course of 12 months.” 

He said with not much differentiation in terms of the core product, the battle will be decided over media spend and site usability (conversion of traffic to sales). “Innovation on the type of deal is easy to copy,” he said.

As for how it applies to travel suppliers, he sees two options.

One, they can compete with daily deals sites. “In fact they always have been – a daily deal is a promotion that lasts a day, with less risk and previously, you had to predict the take up rather make the offer conditional, a simople step that works for the supplier and the consumer.”

Or two, they can take part on the daily deal sites, but offering to split the margin with these sites – who essentially become media/affiliates.
“I think the majority will, after trying various routes, end up in using a blend of both one and two.”

Siva added, “I think these sites are fulfilling the early promise of the internet (to consumers), where technology allows us to get better deals.

“It helps suppliers by getting great ways to get rid of distressed inventory – group deals can be better than offers, because there is less risk on offer take up – but ultimately, given the competition, this will see an erosion of margins.”

Erosion of margins is a concern raised by Stephen Joyce of CEO of Rezgo.com, especially for small tourism businesses.

In a post at Tnooz, Joyce said, “For many small tour and activity businesses, where the owner of the business does not necessarily have a business background, the seduction of acquiring hundreds of new customers without investing any upfront cash can seem too good to be true.

“But, frankly, it is too good to be true and the downstream costs for a small business, once all the numbers are crunched, are perhaps not what a business owner might have expected.

“You don’t have to look very far on the web to find stories of disgruntled retailers, spa owners, restauranteurs, and even photographers who have been stung by a Groupon promotion. What seems to be a common theme across all of these stories, however, is the lack of understanding of the true costs of running a group buy promotion and the impact it has on cash flow and future revenue.”

Luzi Matzig (left), group CEO of Asian Trails, a destination management company based in Thailand, believes that hotel deals using Groupon would work in principle but only as long as hotels have excess inventory.

“In markets where hotel space is tight like in Singapore and Bali, this would hardly work. It should not be a problem in Bangkok however as we have a great overcapacity of rooms to sell.”

He sees it working for restaurants, especially during weekdays, some shows and tour activities based on seat in coach deals. “The disadvantage is that owners and operators end up getting paid only 30-40%.”

Grahame Tate, managing director of IDeaS Asia Pacific, said there will always be a need for demand generation and “although they say Asian races love a deal – lets face it all races love a deal.”

“Need for business + people who want a deal = successful business model.”

“From what I have seen, sites like Groupon and say, living social in Sydney, have been focusing on businesses where they are relatively “unsophisticated” in terms of forecasting and have very limited marketing budget – so it makes great sense to have your business use this channel.

“In principle and given things on an equal footing, if it’s a non-dynamic price environment that the business operates in (and these are getting less and less ) eg bicycle shops, then a forecast is pretty simple and if business is down, it’s easy to use group on principle to generate business. But in a dynamic pricing environment, it’s a bit more complicated.

“It could be that a poor or poorly timed and priced campaign executed by a hotel could dilute the business that was already coming.”

Looking further down the road, Siva sees a few trends emerging:
• Deals and coupons merging
• Location and mobility being critical
• Effectively targeting deals by finding the balance between lowest common denominator deals with low conversion against targeted, more likely to convert deals and accessing social media content such as status or most recent posts – determine mood and sentiment

“The ultimate scenario is a combination of Augmented Reality and Effective Targeting so that as I travel, or go about my daily life, I am specifically targeted based on my behaviour with the most appropriate deal at that time, mood – and place.

“But then again – I could be wrong.”