Groupon clones providing collective buying deals via websites emerged in Vietnam, taking inspiration from Groupon.com. The largest clones were NhomMua.com, Hotdeal.vn, MuaChung.vn and CungMua.com. They offered daily deals with discounts to customers who reached a minimum purchase threshold, but faced limitations from the underdeveloped e-payment market requiring high costs for cash-on-delivery orders. The long-term sustainability of the Groupon clone business model in Vietnam was uncertain given high operating costs.

1. Page 1
Groupon Clones in Vietnam
Collective Buying via the Web
Tai Tran, updated 24.10.2011

2. Page 2
• 24.10.2011
– Slide 4, a few more sites
– Slide 26 - 31 on financial information
Updates

3. Page 3
Terminologies
• Idea from Groupon.com, a
portmanteau derived from
"group" and "coupon"
• Use Groupon logo as
representative of Groupon &
Groupon clones in Vietnam
• Merchants in this research are
usually retailers
• CC: credit card
• COD: cash on delivery
• VP: pay & receive voucher in
providers' office
Disclaimer
• Information from this slide is
solicited from public sources
only
• The author does not benefit
from promoting any service
mentioned in this slide
• This slide does not necessarily
reflect the investment view of
the author
• This slide does not necessarily
reflect the investment view of
the organization where the
author works
• Disclosure: the author is not
working at a venture capital
firm

4. Page 4

5. Page 5
Big 4 (updated July 2011)

6. Page 6
Traffic
Source: Google AdPlanner, composed by Phi http://twitter.com/p2045i/status/107757376874086400/photo/1

7. Page 7
• NhomMua.com
– Leader
– Free COD
– Heavy advertising
– Experience from industry investor (Rebate
Networks)
• Hotdeal.vn
– Fast follower
– Free COD
– More mature segment
• MuaChung.vn
– Selective deals
– Focus on menu sets => benefits for the
restaurants
– Educate user to use e-payment (VCCorp's
SohaPay), intentionally charge COD
– User base from VCCorp's sites
• CungMua.com
– Fast follower
– Mid-end vendors
– Efficiency
– Launch inCard.vn
• Zing Deal
– (used to) promote Zing Xu (payment
system), but was forced to offer free COD
– User base from Zing's sites
• KhuyenMaiVang.vn
– Experienced sales force from 5giay
• 51deal.vn
– SMS code: buyer pay after using service =>
buy without painstaking research
• Everyday.vn
– BTA
– Rebate unused vouchers after expiry dates
• Others notable
– CungMuaSam.net
– NecDeal.com
• Many other are declining: vndoan,
runhau, supersale, phagia, muale…
• Why hasn't PeaceSoft, VTC and FPT Online
joined the hype?
– My speculation: PeaceSoft wants to focus
on its core business - eBay clone, and
maybe it is too busy with integrating
ChoDienTu to eBay and NganLuong to
PayPal
A few notable sites

8. Page 8
• Deal aggregators
Secondary sites

9. Page 9
• 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
Limitations of clones in Vietnam

10. Page 10
• Acquired by Groupon.com or Living Social
Exit strategy

11. Page 11
The Groupon Business Model

12. Page 12
11/2008
•Launched in Chicago,
founder: Andrew Mason
•$1m seed investment
2010
•150 North American
markets, 100 EU-Asia-
South America markets
•35m users
•Acquire global clones in
EU, South America,
Sing, Japan, Russia,
Hongkong, Philippines,
Taiwan, Malay
•1500 employees
2011
•Turn down Google's
$6b acquisition
•File for IPO $11b
•Break-even Q3 2011
•8000 employees, 4000
sales
The original Groupon.com
More of a Sales company than a technical
product. Technology is NOT important
Funding
1. Keywell $1m, 2007
2. New Enterprise Associates $6.8m, 2008
3. Accel $30m, 2009
4. Digital Sky Tech $135m, 2010

13. Page 13
• We provide mostly free web services
• We have large user communities
• How do we monetize the user base besides selling ad?
Web service
providers
• We offer products / services
• How do we market besides traditional marketing
channels?
Merchants
• How do I discover good deals?
• How to I explore good products & services?
• How do I explore my connections' preference?
Customers
Demands

14. Page 14

15. Page 15
Model
Ad on Site
Offer discount
if threshold
(min number of
buyers) is met
Discount
voucher
Merchants
Customer
(also web users)
• Payment
• Pageview
Customer
Bring the voucher to Shop and redeem
product/service
Merchants
• Offer product/service
• Hope to retain the customers
Revenue
less
Groupon fee
Win-Win-Win for all 3 parties

16. Page 16
Win-Win-Win what?
Groupon Merchant Customer
Boons • Source of Revenue
• Low cost of building
a website (users
focus on deals rather
than user
experience)
• Share viral costs with
users (users share
the news among
themselves via
Facebook, chat)
• Sell big lots
• Flexible marketing channel
• Revenue upfront
• Some customers do not
redeem the voucher before
expiry => revenue without
offering service. 25%
vouchers are never redeemed
~ $1.2b (approximately
$300m free cash for
merchants)
• Discounts
• Explore
preferences of
connections
Disadvant
ages
• High payment &
delivery cost (next
slides)
• Drive down margin • Pay upfront
Risks • Obscure pricing &
service quality from
merchants may hurt
the reputation of the
web provider
• Can't handle the flood of
voucher redeemers
• No guarantee customers will
come back after using the
discount
• Ambiguous pricing
• Inconsistent
service quality

17. Page 17
Value proposition to merchants
Network of Subscribers
Access to
Network of
Subscribers
Vast
Distribution for
Promotion to
Potential New
and Return
Customers
Consumer
Profile
Targeted Deal
Distribution
and Access to
Customer
Demographics
Assurance
Contract to
Deal
Activation
No Upfront
Cost to Run
Deal
Develop
Promotion
and
Editorial for
Merchant
No additional
promotion cost
to increase
brand
awareness
Customer
Service to
Manage
Deals
Merchants can
focus on
servicing
additional
customers

18. Page 18
Industries Groupon focuses on
Restau-
rants
Fashion
Beauty Travel
• Small-value items
• New companies / new branches
• High customer acquisition cost
• Companies without full-pledged
retail network
• Low cost of goods sold (CoGS)
• Travel & spa: flexible CoGS
• Restaurants: meal set should be
optimized so that buyers would
order more
• High-value items
– e.g. iPad
– For promotion
campaigns
– If offered as deal: attract
huge amount of users
– Given for free as
promotion
• Users give up personal
information for a chance
to win the item
• Marketing for the site

19. Page 19

20. Page 20
Categories

21. Page 21
• Merchants need to be
consulted on
– Number of vouchers
– Threshold
– Discount rate
– Duration of campaign
– Deal design
• Which items
• Menu set
Economics of merchant

22. Page 22
Customers demographics
Early adopters
Likely
Facebook
user
Office
professional
Disposable
income
Urban
females

23. Page 23
• 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%
Charges
Full Price $40
Discounted Price $20
Merchant receive $14
Physical goods:
fixed, CoGS, profit
on large quantity
Service: low CoS,
can be profitable
Groupon retains 30%, or $6
Selling cost Delivery cost Marketing cost Management cost

24. Page 24
• COD: cash on delivery
– Customer places order, Groupon calls to confirm
– Groupon prints voucher
– Pay cash at customer's 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
Payment

25. Page 25
Cost Management
• Underdeveloped e-Payment
industry
• Collecting payment, refund,
rebate is too costly
• For smaller sites: if threshold
(minimum number of buyers) is
not met, the deal becomes
invalid and cost incurs without
revenue
Business model sustainable?
• Winner takes it all?
– No
– This is retail business. There is
room for followers
• Issues (criticism)
– Positive cash flow vs. loss in
income statement?
– Ponzi scheme?
• The current business model is
too costly to sustain
• Innovation is needed to further
develop this model
Money

26. Page 26
• 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
Financial

27. Page 27

28. Page 28

29. Page 29
Vietnam 2010 (VND trillion)
F&B 19.3
Household
goods &
services
4.3
Transport
7
Hotels &
caring 4.4
Healthcare
3.7
Market Sizes

30. Page 30
-125%
-100%
-75%
-50%
-25%
0%
25%
50%
75%
100%
2009 First 3
quarters
2010
2010 First 3
quarters
2011
Per Revenue Ratios
Marketing% SGA%
Acquisition% Net profit%
Brief Financial Analysis
If Groupon further cut marketing expense by 35%,
the company would immediately be profitable today.
0
5
10
15
20
25
30
35
40
45
50
55
60
7.5 8.5 9.510.511.512.513.514.5
PriceperShare
MRP
Sensitivity to market
Key assumptions
• Revenue 2011E 1.5b
• The company retains break-even
state in Q4 2011
• Risk-free rate = 10-year US
government bond rate
• Negative beta

31. Page 31
-53
590.49 495.46
-25
0
25
50
75
100
125
150
175
200
225
250
Market Cap ($b) P/E Share Price 24.10.11 Revenue most recent quarter ($b)

32. Page 32
Rivalry:
high
Threat of
new
entrant:
high
Buyer
power
(customer):
high
Substitute:
moderate
Supplier
power
(merchant):
low
• Cost to launch a new website is
low
• Focus on developing sales team
• Existing users/communities
from other sites in the same
company: a requirement
• Positive cash flow
Numerous merchants
Low switching cost
Numerous deal hunters
Low switching cost
Five forces
For customers:
• Coupon books
• Direct promotions
For merchants:
• Ad on Google (search engine)
• Ad/coupon on Facebook (social
media)
• Direct promotions

33. Page 33
Comparisons

34. Page 34
• Groupon Store: self-serving store for merchant
• Groupon Now: what to buy today with Groupon,
location-based
New Services

35. Page 35
International Expansion
CityDeal in
Europe
Darberry in
Russia
Qpod in
Japan
uBuyiBuy in
Hong Kong
SoSasta in
India
Groupoer in
South Africa
Twangoo in
Israel
Gaopeng in
China with
partnership
from Tencent

36. Page 36
Future
Opportunities
• Young population, eager to try new
experience
• Post-crisis frugality
• Herd behavior
Values
brought to
Vietnam
• For the first time, e-commerce goes mass
• Educate e-payment
• Attract attention from users, media,
investors
2011: educating
market
Market
size $30m
2013:
mature
market
Market
size $100m

37. Page 37
Success drivers
Clear strategy
Strong
sale
team
Reduce
cost of
delivery
Backed
by
existing
comm-
unities
Quantitatively consult merchants
on logistics: optimal deal size,
discount, maximum number of
vouchers, duration

38. Page 38
• A Harvard Business School research
– Merchants with discounts is more likely to be profitable
– Voucher services grow: customers over-rely on vouchers
Research result

39. Page 39
• 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
• Groupon's IPO Roadshow http://www.businessinsider.com/groupon-
ipo-roadshow-slides-2011-10?op=1
Reference

40. Page 40
1. Blog http://taitran.vn
2. LinkedIn http://www.linkedin.com/in/taitran
3. Facebook http://www.facebook.com/taitran
4. Google+ http://gplus.to/taitran
5. LinkHay Money http://www.linkhay.com/tien
Tai Tran