This document contains information about the Ensogo and the reasons for its failure or collapsed.

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DOCTOR IN INFORMATION TECHNOLOGY
ADVANCE ELECTRONIC COMMERCE
E-COMMERCE COMPANY THAT FAILED
Prepared/Compiled by:
FOR-IAN V. SANDOVAL
20170148364
Submitted to:
MEL VINZ BALLERA, Ph.D. CS
Professor
2017

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TABLE OF CONTENTS
Title Page 1
Table of Contents 2
What is Ensogo? 3
Vision 3
Mission 3
History 3
Business Model 4
Factors Lead to the Failure of Ensogo 5
Other Reasons Why Ensogo Collapsed 7
Conclusion 9
References 9

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WHAT IS ENSOGO?
Ensogo is an Australia-based social commerce website that offers members
discounted daily deals on restaurants, hotel accommodations, spa services, beauty
treatments, activities and retail products.
It is a LivingSocial Company primarily offers discounted daily deals on lifestyle
and entertainment things to do, see, eat, and buy around Philippines and South East
Asia. Consumers start by signing up and creating an account at Ensogo to be a
member. This will then allow them to buy discounted products and services from the
site when they log in to their accounts. Members can also earn credits by referring
friends who purchase their first deal. They can then use the credits they earn from
referral for buying products and services they want from the site.
VISION
The Ensogo vision is to pioneer Social Commerce through supporting social
responsibility. Social responsibility is important for Ensogo members and business
partners, which is why a part of all Ensogo sales are donated to local charities.
Because transparency is valued by Ensogo Inc., the company shows the amount
donated to charity, contributed by their business partners and members.
MISSION
The Ensogo mission is to make it more affordable for consumers to shop,
dine, travel, and do their favorite activities.
HISTORY
Ensogo is derived from the words Entertain, Social, and Go. Ensogo was
officially incorporated as a legal entity in 2009 in Thailand. It also operates the
following brands:
 LivingSocial (2010), operated in Indonesia and Malaysia
 Dealmates (2011), operated in Malaysia
 Mydeal.com.my, operated in Malaysia and Deal.com.sg, operated
in Singapore
 Beecrazy, operated in Hong Kong
Ensogo is now a part of LivingSocial, a global company with approximately 43 million
members in 25 countries. In June 2011, Ensogo was acquired by LivingSocial. The
acquisition extended in Philippines as well as in Indonesia. The operation in
Indonesia was under the name DealKaren. LivingSocial sold their South East Asia
operation to Patrick Grove's iBuy Group in April 2014, and iBuy Group floated
the IPO to Australian Securities Exchange on December 20 of the same year,
renaming iBuy to Ensogo and use the ticker E88.

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In The Philippines, Ensogo Philippines is a Social Commerce website that
offers members discounted deals in Manila, Cebu and soon in Davao. The deals are
available for 3 - 7 days to their members at savings of up to 90% off regular price.
On June 21, 2016, Ensogo announced that it will shut down all South East
Asia operation (including Hong Kong) and its CEO Kris Marszalek has resigned; it
also requests ASX to suspend shares trading. The unprecedented shutdown
affected operations in several countries; workers in Singapore found the office was
closed, Hong Kong sellers call for police investigation of fraud and certain stores in
Thailand rejecting deals purchased by consumers, though the Consumer Protection
Board is expected to summon Ensogo executives for remedial issues.
BUSINESS MODEL
Ensogo helps in advertising the brand, products, or services of their partner
business to Ensogo members and to online consumers. They work with local
business partners to make deals more affordable for their members. Their partners
benefit from obtaining new customers in their stores and getting marketing exposure
without any upfront cost.
Ensogo makes money through revenue share with their business partners.
Ensogo receives a Success Fee from the vouchers they sell for businesses. If there
is no sale, businesses still get free marketing and publicity. Because Ensogo offers
Performance Marketing, it is considered a non-risk for businesses who want to reach
new customers.
Not able to wait for the South-East Asian e-commerce market to realize its oft
touted potential, ASX (Australian Securities Exhange) listed, Ensogo Ltd,
headquartered in Singapore, changed its model to a B2C marketplace in January
2016 as it sought the profitability demanded of it as a listed company. The business
model change allows Ensogo to scale rapidly and be global.
In its previous iteration as an e-commerce company, its markets were
Thailand, Malaysia, Indonesia and Philippines with each served by its own website
and in-country operations. From starting out as individual flash sales and daily deals
site across South-East Asia and Hong Kong since 2011, to becoming a more
mainstream e-commerce merchant after a corporate exercise engineered by Catcha
Group chairman Patrick Grove in 2013, Ensogo’s B2C marketplace app has hit
500,000 downloads and is its main platform to connect sellers to buyers – globally –
thanks to the ability of sellers in China and Korea being able to deliver orders to over
50 countries.
Changing the model also came with a new revenue stream. Instead of waiting
for its marketplace to gain traction and then charging sellers, Ensogo started
charging its sellers a 15% fee right from the beginning. It started exclusively with
Chinese merchants in Jan 2016 and added Korean sellers from April. It started
charging its domestic suppliers, meaning in-country sellers, from April. However,
Ensogo will stop dealing with all in-country suppliers within the next few months as

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the marketplace model focuses on supply from sellers in China and Korea who can
deliver cross border.
FACTORS LEAD TO THE CLOSURE OF ENSOGO
Ensogo was one of the most promising e-commerce startups around
Southeast Asia. It was accompanied with increasing popularity and stable financials,
the agile and smooth expansion to Philippines and Indonesia further marked its
outstanding performance. Everything seemed bright and clear for the regional
consolidation of Ensogo. However, no one would ever anticipate that the shining
supernovae was actually trapped into mire until the debacle went out of their control
and was disclosed publicly in May this year, due to intentionally delayed payments
and abruptly terminated hotlines. The unexpected suspension affects thousands of
sellers’ business and buyers’ rights and interests, leaving Ensogo in irrecoverable
situation. The once valuable vouchers were just changed into pieces of useless as
well as unwanted paper.
The causation behind this is complicated. Nevertheless, the factors leading to
the closure can be roughly broken down into three distinctions:
1. The Essence of Discounted Deals
With the launch of Groupon in 2008, the service of daily-deal offering brought
up the insane trend of group buying into everywhere it stepped on.
Theoretically, this service benefits both shoppers and sellers, creating a win-
win situation. For customers, they could get a significant amount of discount on
expensive products or services. For sellers, on the other hand, the annoying problem
of keeping excess inventory or old-fashioned products would be solved, with
additional revenue and brand promotion concurrently.
However, a Rice University study conducted in 2011 revealed a warning
signal attached to this business model. The researcher found that this model was
potentially harmful to a business because those shoppers rarely become regular and
loyal customers. Seldom did they make a full-price purchase after using vouchers.
Simply put, it only created one-time transactions for business. The discounts neither
burgeoned customer base nor augmented any profit. Therefore, less and less
merchants were willing to use the model.
It wasn’t until September 2015 did the negative effects impact Groupon. It was
reported that the giant cut 1,100 jobs and exit seven countries in order to stem
continuously financial deficit. More resources indicated the augmented pieces of
complaint about terrible experience in using Groupon greatly influenced Groupon
business. Undoubtedly, the scenario is similar to what Ensogo is experiencing in
2016 under a much worse circumstance.

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2. The Decision of Business Model Pivot
The adoption of B2C model was not a good idea for Ensogo. It is a field
characterized by capital-intensive investment, winner-take-all outcome and long-term
war of attrition. On top of that, major powers were already existing, either local or
global one, occupying this region. All of them are supported by plenty of silver bullets
and have accumulated a great number of customer base and incomparable
infrastructure. Even though Ensogo has the backup from Chinese discounted retail
giant Vipshop, the decision seemed too reckless and unwise.
A notable example is Rocket-Internet-backed Lazada, which becomes much
more powerful after the buyout from Alibaba. Clearly, Ensogo overestimated its
capability in the transformation process, and underestimated the opportunity cost
and potential loss in the transition from a service middleman to a marketplace
platform. More importantly, Ensogo should have adopted a blue ocean strategy —
discover niche market and avoid potential competition— to facilitate and augment
corporate growth.
Moreover, the sellers that they targeted in the new business model
exacerbate the situation. Ensogo’s B2C marketplace was focused only on Chinese
and Korean sellers due to their ability to deliver product cross over 50 countries.
Nevertheless, this model couldn’t differentiate Ensogo from other e-commerce
players as they have already involved Korean and Chinese sellers into their platform
to cater various and diverse demands. As such, this strategy somehow weakened
the substantial collaboration and connection with regional merchants it has
developed in Southeast Asia, rebounding on both parties.
3. The Hasty Layoff of Employees
Customer service plays an indispensable and integral role in e-commerce
business. The quality of customer service and service attitude, whether to shoppers
or sellers, determine if a company could win the heart and support of local people. It
is especially applicable in Southeast Asia due to the region’s distinctive shopping
habit: customers tend to make a phone call to check before placing an order.
However, the way Ensogo treats shoppers and buyers were not appealing, let
alone friendly, during the time of pivoting. The unanticipated dis-employment across
the region and inappropriate recourse in handling customer complaint irritated
numerous merchants. Hence, it further drew the public’s attention to this
deteriorating reputation.

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OTHER REASONS WHY ENSOGO COLLAPSED
The signs were hard to ignore. Here are the other likely reasons for Ensogo’s
collapse:
1. It held on to daily deals and flash sales for too long
Ensogo daily deals site selling vouchers to users for things like a spa visit, a
tour, or restaurant dining. Like everyone else doing the same thing, it was a copycat
of US-based Groupon, which started the whole craze. When Ensogo was acquired
by Groupon’s arch rival LivingSocial, it soon found itself fast expanding in markets.
The number of staff grew and things got expensive.
Industry competition became too stiff. People grew tired of their inboxes
flooded with offers from a sheer number of deals sites and fewer than expected
users turned into loyal, full-price paying customers at those restaurants and spas.
Suddenly, what was once the darling of the tech world began fizzling out. The writing
was on the wall as early as 2013 when a “deals fatigue” began to emerge in the US.
Perhaps the fatigue took time to spread to Southeast Asia, so Ensogo went about its
business.
The company was acquired by flash sales firm iBuy of the Catcha Group in
2014, which persisted with trying to make that model work for a time. Similar to daily
deals, flash sales offer steep discounts but for physical products like clothing and
accessories. It’s a product retailing business that requires entire infrastructure –
inventory, warehousing, and fulfilment services. It wasn’t until 2015 that Ensogo
decided to move away from deals to become a more conventional online store where
merchants and brands sold directly to consumers. Like a marketplace, which may
not be as capital intensive.
2. It was late in the marketplace game
By that time however, it seems Ensogo was too late. Lazada, Ensogo’s main
rival, was already well embedded across Southeast Asia after being launched by
Germany’s Rocket Internet. And startup marketplaces like Carousell and Duriana
were already running and gaining traction. Lazada started out in 2012 as an
Amazon-esque site with its own inventory and warehousing, but it began to evolve
into an open marketplace by 2013, when Ensogo was still very much in the daily
deals game.
An outsider, Lazada took on a mixed bag of nations. Singapore is highly
developed place and a relatively easy zone in which to set up an ecommerce
business. Other markets are tough. Indonesia, Malaysia, the Philippines, Thailand,
and Vietnam are all nascent tech markets plagued by issues, mainly a woefully
inefficient logistics and digital payments network. Yet Lazada was able to navigate
the waters. It wasn’t necessarily the top online store in every market, but Lazada
became popular among online shoppers region-wide.
That’s probably why it was an attractive buy for China’s Alibaba, which has
tapped most of its home market and is looking for fresh and fertile ground. If you’re

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Alibaba, you’d want to acquire the biggest, baddest boy in the room, given how
ecommerce is a game of volume. Ensogo, on the other hand, was trailing behind.
3. It couldn’t stem its losses and was burning cash
As it tried hard to shake off its past, Ensogo was seeing its losses widen in a
bonfire of burning cash. Southeast Asia is a region with potential due its 600 million-
plus population and rising middle class. But as what said, most of its countries are
still very young tech markets and the growth curve for smartphone and internet
access and online spending may be slower than anticipated. It’s a big risk to take.
Not even Amazon dared to venture into it.
Even Lazada supposedly saw its war chest almost depleted right before
Alibaba came in the picture with its huge investment. While Rocket Internet’s site
was an ecommerce leader in the region, it was far from being profitable. Recent data
showed Lazada registered US$310 million in revenue in 2015, but more than
doubled its loss to US$334 million.
Ensogo has also been struggling financially. It saw its losses widen to
US$59.5 million in 2015 versus US$50.3 million the previous year, according to the
company’s report submitted to the Australian Securities Exchange (ASX), where it’s
listed. Another filing showed it recorded US$16.7 million in receipts from customers
for the first quarter of 2016. Taking into account all the company’s costs and
expenses plus cash it had at the beginning of the year, its total cash at hand stood at
only US$13 million. That meant if it failed to stem its losses and didn’t raise
additional money or trim costs, it would run out of cash before the year ends.
It wasn’t known whether Ensogo was trying to raise funds. But with the
board’s decision to close down essentially its entire business, it tells you its investors
weren’t willing to inject more money into the ailing company. Instead, the
management team pulled the plug to preserve whatever cash the company has left.
4. It disappointed merchants
One way for Ensogo to reduce cash burn was cut its workforce and
centralizes its operations in Singapore. That was probably the last blow that made all
the walls crumble down. In April, the company was hit by merchant complaints over
delayed payments, which it later admitted was a result of the layoffs. Things
snowballed from there. Following the controversy, Ensogo saw two directors resign
and a substantial investor sell its shares in the company. Then yesterday, the
marketplace closures.
With Lazada already established as the number one, the challenge for
Ensogo was to convince merchants and shoppers alike to give it a try. But the
delayed payments fiasco put a dent in Ensogo’s reputation even before it had time to
fully build it. For merchants, any delay in payments for goods they had shipped could
mean a serious strain on their businesses.

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CONCLUSION
In a report, merchants began complaining they weren’t receiving the money
for the products they’d sold through the site. It all went south from there. Ensogo was
blaming delayed payments to merchants on reduced manpower after it cut its team
size. Customer complaints piled up. Ensogo’s Australian shareholders withdrew all
support for Asian operations and the marketplaces went offline. The factors and
reasons of Ensogo’s failure obviously focused on it concept, which relied heavily on
discounts, deals, and flash sales, failed to generate loyal customers.
Ensogo says it will use its remaining cash for “new investment opportunities.”
That signals the remaining team still has plans. Perhaps when all this has died down,
it will relaunch – but it better be under a different name. There’s a stigma attached to
“Ensogo” now.
Ensogo is dead, but Catcha Group founder Patrick Grove still has iFlix, iCar
Asia, iProperty, and Rev Asia to care about.
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Asia. Retrieved 23 June 2016.
Boon, R. (2016, June 22). "Troubled e-retailer Ensogo shuts Singapore operations". The Straits
Times. Retrieved 23 June 2016.
Chen, E. (2016, June 13). What Factors Lead to the Closure of Ensogo. E27. Retrieved from
https://e27.co/factors-lead-closure-ensogo-20160630/
Chung, F. (2016, June 22). "Anger as BeeCrazy buzzes off". The Standard. Retrieved 23 June 2016.
"Coupon Clash". www.sea-globe.com. Retrieved 2 March 2012.
"Ensogo Philippines redefines "sale"". Manila Bulletin. Archived from the original on 2012-04-24.
Freischlad. N. (2016, December 3). 15 Startup Failures in Asia This Year. TechinAsia. Retrieved from
https://www.techinasia.com/
Kruger, C. (2014, December 18). "Goodbye iBuy, Hello Ensogo, here's how to gloss over an IPO
dog". The Sydney Morning Herald. Retrieved 23 June 2016.
"LivingSocial Acquires Ensogo". techcrunch.com. Retrieved 2 March 2012.
"LivingSocial Sells Southeast Asia Business to iBuy Group for $18.5 Million" (Press
release). LivingSocial. 1 April 2014. Retrieved 23 June 2016.
Singh, K. (2016, May 06). In Search of Profit, Ensogo adopts B2C Marketplace Model. Digital News
Asia. Retrieved from https://www.digitalnewsasia.com
Thongtep, W., et. al. (2016, June 23). "Ensogo executives summoned". The Nation. Retrieved 23
June 2016