Groupon Clones in Vietnam Collective Buying via the Web  Tai Tran, updated 24.10.2011                                 Page 1
Updates• 24.10.2011  – Slide 4, a few more sites  – Slide 26 - 31 on financial information                                ...
Terminologies                      Disclaimer• Idea from Groupon.com, a         • Information from this slide is  portmant...
Page 4
Big 4 (updated July 2011)                            Page 5
TrafficSource: Google AdPlanner, composed by Phi http://twitter.com/p2045i/status/107757376874086400/photo/1              ...
•   Zing DealA NhomMua.com•   few notable sites                                      – (used to) promote Zing Xu (payment ...
Secondary sites• Deal aggregators                     Page 8
Limitations of clones in Vietnam• Underdeveloped e-payment market => high cost of  COD• Lack of financial tricks e.g. trad...
Exit strategy• Acquired by Groupon.com or Living Social                                             Page 10
The Groupon Business Model                             Page 11
The original Groupon.com More of a Sales company than a technical product. Technology is NOT importantFunding1. Keywell $1...
DemandsWeb service   • We provide mostly free web services              • We have large user communities providers    • Ho...
Page 14
Model                  Ad on Site               Discount                                           voucher                ...
Win-Win-Win what?           Groupon                    Merchant                        CustomerBoons      • Source of Reve...
Value proposition to merchants    Network of Subscribers                                                   Develop        ...
Industries Groupon focuses on•   Small-value items                     • High-value items•   New companies / new branches•...
Page 19
Categories             Page 20
Economics of merchant• Merchants need to be  consulted on  –   Number of vouchers  –   Threshold  –   Discount rate  –   D...
Customers demographics                            Early adopters                                               Likely     ...
Charges• Groupon.com charges 50%      –   Full-price service $40      –   Discounted price $20      –   Groupon retains 50...
Payment• COD: cash on delivery    –   Customer places order, Groupon calls to confirm    –   Groupon prints voucher    –  ...
MoneyCost Management                     Business model sustainable?• Underdeveloped e-Payment          • Winner takes it ...
Financial• Basically broke-even Q3 2011• Free cash flow $60m in Q3 2011• Sales growth slowed - a sign of profitability• Cu...
Page 27
Page 28
Market Sizes                             Healthcare                                3.7                                    ...
Brief Financial Analysis              Per Revenue Ratios                                               Sensitivity to mark...
Market Cap ($b)     P/E   Share Price 24.10.11   Revenue most recent quarter ($b)250225200175150125100 75 50 25           ...
• Cost to launch a new website isFive forces                       Threat of       low                                    ...
Comparisons              Page 33
New Services• Groupon Store: self-serving store for merchant• Groupon Now: what to buy today with Groupon,  location-based...
International Expansion  CityDeal in              SoSasta in    Europe                   India  Darberry in             Gr...
Future               • Young population, eager to try new                       experienceOpportunities                   ...
Success driversQuantitatively consult merchantson logistics: optimal deal size,discount, maximum number ofvouchers, durati...
Research result• A Harvard Business School research  – Merchants with discounts is more likely to be profitable  – Voucher...
Reference• Eliason, Frezgi, Khan, 2010, Group Buying White Paper, Harvard  Business School, accessed from  http://www.slid...
Tai Tran1.   Blog http://taitran.vn2.   LinkedIn http://www.linkedin.com/in/taitran3.   Facebook http://www.facebook.com/t...
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Groupon Clones in Vietnam update 24/10/2011

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Groupon Clones in Vietnam update 24/10/2011
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Groupon Clones in Vietnam update 24/10/2011

  1. 1. Groupon Clones in Vietnam Collective Buying via the Web Tai Tran, updated 24.10.2011 Page 1
  2. 2. Updates• 24.10.2011 – Slide 4, a few more sites – Slide 26 - 31 on financial information Page 2
  3. 3. Terminologies Disclaimer• Idea from Groupon.com, a • Information from this slide is portmanteau derived from solicited from public sources "group" and "coupon" only• Use Groupon logo as • The author does not benefit representative of Groupon & from promoting any service Groupon clones in Vietnam mentioned in this slide• Merchants in this research are • This slide does not necessarily usually retailers reflect the investment view of• CC: credit card the author• COD: cash on delivery • This slide does not necessarily• VP: pay & receive voucher in reflect the investment view of providers office the organization where the author works • Disclosure: the author is not working at a venture capital firm Page 3
  4. 4. Page 4
  5. 5. Big 4 (updated July 2011) Page 5
  6. 6. TrafficSource: Google AdPlanner, composed by Phi http://twitter.com/p2045i/status/107757376874086400/photo/1 Page 6
  7. 7. • Zing DealA NhomMua.com• few notable sites – (used to) promote Zing Xu (payment system), but was forced to offer free COD – Leader – User base from Zings sites – Free COD • KhuyenMaiVang.vn – Heavy advertising – Experienced sales force from 5giay – Experience from industry investor (Rebate Networks) • 51deal.vn – SMS code: buyer pay after using service =>• Hotdeal.vn buy without painstaking research – Fast follower • Everyday.vn – Free COD – BTA – More mature segment – Rebate unused vouchers after expiry dates• MuaChung.vn • Others notable – Selective deals – CungMuaSam.net – Focus on menu sets => benefits for the restaurants – NecDeal.com – Educate user to use e-payment (VCCorps • Many other are declining: vndoan, SohaPay), intentionally charge COD runhau, supersale, phagia, muale… – User base from VCCorps sites • Why hasnt PeaceSoft, VTC and FPT Online• CungMua.com joined the hype? – Fast follower – My speculation: PeaceSoft wants to focus – Mid-end vendors on its core business - eBay clone, and maybe it is too busy with integrating – Efficiency ChoDienTu to eBay and NganLuongPage 7to – Launch inCard.vn PayPal
  8. 8. Secondary sites• Deal aggregators Page 8
  9. 9. Limitations of clones in Vietnam• Underdeveloped e-payment market => high cost of COD• Lack of financial tricks e.g. trade credit, ACSOI• Limited access to fund raising sources• Mapping, location-based and logistics are not fully utilized Page 9
  10. 10. Exit strategy• Acquired by Groupon.com or Living Social Page 10
  11. 11. The Groupon Business Model Page 11
  12. 12. The original Groupon.com More of a Sales company than a technical product. Technology is NOT importantFunding1. Keywell $1m, 20072. New Enterprise Associates $6.8m, 2008 20113. Accel $30m, 2009 • Turn down Googles4. Digital Sky Tech $135m, 2010 $6b acquisition 2010 • File for IPO $11b • Break-even Q3 2011 • 150 North American • 8000 employees, 4000 markets, 100 EU-Asia- sales South America markets • 35m users • Acquire global clones in 11/2008 EU, South America, Sing, Japan, Russia, • Launched in Chicago, Hongkong, Philippines, founder: Andrew Mason Taiwan, Malay • $1m seed investment • 1500 employees Page 12
  13. 13. DemandsWeb service • We provide mostly free web services • We have large user communities providers • How do we monetize the user base besides selling ad? • We offer products / services Merchants • How do we market besides traditional marketing channels? • How do I discover good deals? Customers • How to I explore good products & services? • How do I explore my connections preference? Page 13
  14. 14. Page 14
  15. 15. Model Ad on Site Discount voucher Offer discount if threshold (min number of buyers) is met • Payment CustomerMerchants Revenue • Pageview (also web users) less Groupon fee Merchants Customer • Offer product/service Bring the voucher to Shop and redeem • Hope to retain the customers product/service Win-Win-Win for all 3 parties Page 15
  16. 16. Win-Win-Win what? Groupon Merchant CustomerBoons • Source of Revenue • Sell big lots • Discounts • Low cost of building • Flexible marketing channel • Explore a website (users • Revenue upfront preferences of focus on deals rather • Some customers do not connections than user redeem the voucher before experience) expiry => revenue without • Share viral costs with offering service. 25% users (users share vouchers are never redeemed the news among ~ $1.2b (approximately themselves via $300m free cash for Facebook, chat) merchants)Disadvant • High payment & • Drive down margin • Pay upfrontages delivery cost (next slides)Risks • Obscure pricing & • Cant handle the flood of • Ambiguous pricing service quality from voucher redeemers • Inconsistent merchants may hurt • No guarantee customers will service quality the reputation of the come back after using the web provider discount Page 16
  17. 17. Value proposition to merchants Network of Subscribers Develop Assurance Customer Access to Promotion Consumer Contract to Service toNetwork of and Profile Deal ManageSubscribers Editorial for Activation Deals Merchant Vast Targeted Deal No additional Merchants canDistribution for Distribution No Upfront promotion cost focus on Promotion to and Access to Cost to Run to increase servicingPotential New Customer Deal brand additional and Return Demographics awareness customers Customers Page 17
  18. 18. Industries Groupon focuses on• Small-value items • High-value items• New companies / new branches• High customer acquisition cost – e.g. iPad• Companies without full-pledged retail network – For promotion• Low cost of goods sold (CoGS) campaigns• Travel & spa: flexible CoGS• Restaurants: meal set should be – If offered as deal: attract optimized so that buyers would huge amount of users order more – Given for free as promotion • Users give up personal Beauty Travel information for a chance to win the item Fashion Restau- • Marketing for the site rants Page 18
  19. 19. Page 19
  20. 20. Categories Page 20
  21. 21. Economics of merchant• Merchants need to be consulted on – Number of vouchers – Threshold – Discount rate – Duration of campaign – Deal design • Which items • Menu set Page 21
  22. 22. Customers demographics Early adopters Likely Urban Facebook females user Disposable Office income professional Page 22
  23. 23. Charges• Groupon.com charges 50% – Full-price service $40 – Discounted price $20 – Groupon retains 50% of $20 – Merchants receive $10 – Groupon.com charges lower fees for less prominent ad space• Most Groupon clones in Vietnam charge 15-30% Full Price $40 Discounted Price $20Merchant receive $14 Groupon retains 30%, or $6 Physical goods: Service: low CoS,fixed, CoGS, profit Selling cost Delivery cost Marketing cost Management cost on large quantity can be profitable Page 23
  24. 24. Payment• COD: cash on delivery – Customer places order, Groupon calls to confirm – Groupon prints voucher – Pay cash at customers site – Groupon hires a logistics service – Some offer free delivery, some charge – 90% orders in Vietnam – High cost• Bank transfer through large banks• ATM, Internet Banking• e-Wallet: NganLuong, MobiVi, Payoo, baokim, Soha Pay• SMS: 51deal, phagia Page 24
  25. 25. MoneyCost Management Business model sustainable?• Underdeveloped e-Payment • Winner takes it all? industry – No• Collecting payment, refund, – This is retail business. There is rebate is too costly room for followers• For smaller sites: if threshold • Issues (criticism) (minimum number of buyers) is – Positive cash flow vs. loss in income statement? not met, the deal becomes – Ponzi scheme? invalid and cost incurs without revenue • The current business model is too costly to sustain • Innovation is needed to further develop this model Page 25
  26. 26. Financial• Basically broke-even Q3 2011• Free cash flow $60m in Q3 2011• Sales growth slowed - a sign of profitability• Cutting marketing expense and acquisitions in Q3 2011• IPO – Valuation $11.4b – Proceeds mostly likely to fund international acquisition and product development• "Media attention" is an intangible asset not reflected on the balance sheet Page 26
  27. 27. Page 27
  28. 28. Page 28
  29. 29. Market Sizes Healthcare 3.7 Household goods & services 4.3 F&B 19.3 Vietnam 2010 (VND trillion) Transport 7 Hotels & caring 4.4 Page 29
  30. 30. Brief Financial Analysis Per Revenue Ratios Sensitivity to market Marketing% SGA% 60 55 Acquisition% Net profit% 50 45 Price per Share100% 40 75% 35 30 50% 25 20 25% 15 10 0% 5 0 -25% 2009 First 3 2010 First 3 quarters quarters 7.5 8.5 9.510.511.512.513.514.5 -50% 2010 2011 MRP -75% Key assumptions-100% • Revenue 2011E 1.5b • The company retains break-even-125% state in Q4 2011If Groupon further cut marketing expense by 35%, • Risk-free rate = 10-year USthe company would immediately be profitable today. government bond rate • Negative beta Page 30
  31. 31. Market Cap ($b) P/E Share Price 24.10.11 Revenue most recent quarter ($b)250225200175150125100 75 50 25 590.49 495.46 0 -53-25 Page 31
  32. 32. • Cost to launch a new website isFive forces Threat of low new • Focus on developing sales team • Existing users/communities entrant: from other sites in the same high company: a requirement • Positive cash flow Supplier Buyer power Rivalry: power (merchant): high (customer): low high Numerous merchants Numerous deal hunters Low switching cost Low switching cost For merchants: • Ad on Google (search engine) Substitute: For customers:• Ad/coupon on Facebook (social moderate • Coupon books media) • Direct promotions • Direct promotions Page 32
  33. 33. Comparisons Page 33
  34. 34. New Services• Groupon Store: self-serving store for merchant• Groupon Now: what to buy today with Groupon, location-based Page 34
  35. 35. International Expansion CityDeal in SoSasta in Europe India Darberry in Groupoer in Russia South Africa Qpod in Twangoo in Japan Israel Gaopeng in uBuyiBuy in China with Hong Kong partnership from Tencent Page 35
  36. 36. Future • Young population, eager to try new experienceOpportunities • Post-crisis frugality • Herd behavior • For the first time, e-commerce goes mass Values • Educate e-payment brought to Vietnam • Attract attention from users, media, investors 2011: educating 2013: market mature market Market Market size $30m size $100m Page 36
  37. 37. Success driversQuantitatively consult merchantson logistics: optimal deal size,discount, maximum number ofvouchers, duration Reduce cost of delivery Strong sale team Clear strategy Backed by existing comm- unities Page 37
  38. 38. Research result• A Harvard Business School research – Merchants with discounts is more likely to be profitable – Voucher services grow: customers over-rely on vouchers Page 38
  39. 39. Reference• Eliason, Frezgi, Khan, 2010, Group Buying White Paper, Harvard Business School, accessed from http://www.slideshare.net/HackStartups/group-buying-white-paper• Groupon S-1 Analysis http://www.slideshare.net/MartinNew/groupon-s1-analysis• Groupon Analysis http://www.slideshare.net/elissegaynor/groupon- analysis• Groupon filing to SEC http://sec.gov/Archives/edgar/data/1490281/000104746911008598/ a2205238zs-1a.htm• Groupons IPO Roadshow http://www.businessinsider.com/groupon- ipo-roadshow-slides-2011-10?op=1 Page 39
  40. 40. Tai Tran1. Blog http://taitran.vn2. LinkedIn http://www.linkedin.com/in/taitran3. Facebook http://www.facebook.com/taitran4. Google+ http://gplus.to/taitran5. LinkHay Money http://www.linkhay.com/tien Page 40

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