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Business Advice

Coupon sites losing sheen?

Online coupon sites offer huge discounts, but some customers and merchants are put off by the poor service and bad deals
The Straits Times - December 18, 2011
By: Kimberly Spykerman and Jessica Lim
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Coupon sites losing sheen? MR LUVIN LIM runs a home photography business and sold 520 coupons from September through Groupon. -- ST PHOTO: TED CHEN

Bargain hunters' love affair with online coupon sites offering deep discounts may just be over, with complaints of stale deals, bad service, and unclear terms and conditions.

Some merchants are also complaining that they are getting the short end of the stick, when deals they offer on such group-buying sites cause them to bleed money.

Restaurant owner Edwin Ng, 33, sold about 500 set lunches on several coupon websites at 70 per cent off last year. Each meal originally cost $15.

For each meal sold, he lost $3. Despite this, his Munch chain of restaurants in the financial district has not seen any substantial rise in business.

'We mostly attracted students and housewives who never came back,' he says of the promotion, which he ran on three group-buying websites last year. He says the owner of a group-buying site, whom he declines to name, pushed him to give the huge discount to lure customers, and adds that established players who turn to such websites can end up devaluing their brand.

'It was a very expensive lesson,' he says. 'Would I do it again? A big, loud 'no'.'

Never mind that coupon-waving customers were coming through their doors in droves, at least 15 companies that LifeStyle spoke to said they ended up making a big loss on the deals, which include cheap travel packages, beauty products and car waxes.

Photographer Luvin Lim, 33, has a backlog of jobs, such as touching up photos for customers, for the photography business he runs from home, Pictures & Pixels. Since September, he has sold 520 coupons through Groupon for an outdoor shoot at $18, down from the original price of $375. He says he would have been more comfortable with 200 fewer coupons.

He says he had not capped the number of coupons as the site's merchant manager advised him that, as a new merchant with a relatively less popular service, he would not be likely to sell many coupons.

Booked with Groupon customers until the end of March next year, he says: 'I am coping and maybe it's the Christmas rush now, but I am feeling tired and it would be a major loss if I have a full-paying client and I'm already booked with Groupon clients.'

Coupon sites here, however, say there is help for merchants who have difficulty coping with clients.

Groupon, arguably the biggest player here, says that account managers meet merchants to help them plan how many customers they can cope with, and to ensure that their service to regular customers is not compromised. They also offer solutions if there are any problems, such as advising a restaurant to designate extra staff to deal with the increase in phone inquiries and bookings from Groupon customers.

Mr Karl Chong, CEO of Groupon Singapore, says: 'We approach each merchant with a tailored, individual approach based on the prior history of similar deals. While we do consult merchants based on our experience, the final decision for the sales goal rests with the merchant.'

Mr Raj Datwani, 30, co-owner of another deal site here, UrbanJourney.com, says: 'We try to go for merchants who don't hop from deal site to deal site. The cut has to be something that they are happy with.' This also means his site sometimes takes a lower cut of the revenue generated by the coupons.

There are now at least 70 such sites in Singapore.

These work by e-mailing subscribers daily alerts about attractive, pre-negotiated deals with local merchants. Using the principles of bulk-buying, the deals go ahead when a minimum number of people jump on board. Discounts can go up to 96 per cent. In return, the site takes from merchants up to 50 per cent of the revenue they generate from each coupon sold.

Civil servant Richelle Teng, 26, who has been buying from various coupon sites for about six months, recently stopped doing so. 'Some places that offer manicure and pedicures, as well as hair salons, are quite unknown. When I looked up reviews of these places, some were quite bad,' she says.

Similarly, Ms Liza Kwek, 26, who works in the finance industry, found it difficult to fix an appointment to get her car polished after signing up for a half-priced car polishing package as many slots had been snapped up. The package originally cost more than $100.

The New York Times reported in October that dozens of coupon sites in the United States have closed, were merging or reinventing themselves as merchants struggled to cope with high customer volume and losses.

In Singapore, some of the more popular players are Groupon.sg, AllDealsAsia.com, VoucherWow.com, Deal.com.sg and BigDeal.sg.

Marketing guru Bernd Schmitt, 54, director of the newly created institute on Asian Consumer Insight at Nanyang Technological University, notes that larger companies have an advantage when working with these coupon sites.

He says they tend to have wider profit margins and can afford to give heavy discounts.

Typically, these companies also know when their lull and peak periods are, he adds, so they can use these sites to their advantage by pulling in people during specific times.

CTC Travel, which offers between 30 and 60 per cent off for tour packages to regional destinations such as Hong Kong, Bali and Bangkok on sites such as Groupon, Streetdeal.sg and Deal.com.sg, says it does not lose money on such deals - its profit margins are simply slimmer.

Ms Alicia Seah, its senior vice-president of marketing, says: 'It helps us to increase business during a lull period and when airlines and hotels suddenly offer special fares to us.'

Still, some merchants will continue to use coupon websites as a relatively inexpensive way to get the word out about their business.

Mr Euntae Chun, 32, who owns two-month-old The Corner Place Korean BBQ in Marina Square, starting selling set meals at half price on Groupon recently. To date, he has sold about 5,000 coupons. At least they bring customers into the restaurant, he says.

'My main concern was getting exposure. There is a cost involved, but you have to accept that. If I don't get customers to come and dine here, how can they make a choice about whether to come back?' he adds.

Additional reporting by Lim Yanliang

 

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