Page 1

Groupon Clones in Vietnam

Collective Buying via the Web

Tai Tran, updated 12.1.2012

Page 2

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

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13.11.11

97 clones

methods

97 clones

14 aggregators

8 payment

methods

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0

50

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0

5

10

15

20

25

30

35

Nu

mb

er

of

de

als

Re

ve

nu

e (

VN

Db

)

HotDeal.vn NhomMua.com CungMua.com MuaChung.vn

HotDeal.vn NhomMua.com CungMua.com MuaChung.vn

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50

100

150

200

250

300

350

Dec-10 Jan-11 Mar-11 Apr-11 Jun-11 Aug-11 Sep-11

Average deal value

HotDeal.vn NhomMua.com CungMua.com MuaChung.vn

Page 7

Traffic

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

Page 8Source: internal data tracking

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• 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

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• Aggregate deals from sites

• Secondary deal market: buyers who don't consume

purchased deals can sell the vouchers

• Community building: DealHunter.vn

Deal aggregators

Page 11

• NhomMua and MuaChung are leading

Brand equity

Page 12

• 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

Page 13

• Acquired by Groupon.com or Living Social

Exit strategy

Page 14

• Merchants offering their own Groupon

– muachung.dienmay.com

– nhanhnhanh.vn

• Mobile app & location-based

• Aggregator filling the gap from Yelp clones' failure

• Social shopping

Trends of Vietnam Groupon clones

Page 15

The Groupon Business Model

Page 16

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

•IPO $15b

•Break-even Q3 2011

•9625 employees, 4000 sales

The original Groupon.com Inc (GRPN)

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

Page 17

• 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

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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

Page 20

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

http://www.readwriteweb.com/archives/over_1_billion_in_daily_deal_value_has_disappeared.php

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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

Page 22

Industries Groupon focuses on

F&B

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

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Categories

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• Merchants need to be

consulted on

– Number of vouchers

– Threshold

– Discount rate

– Duration of campaign

– Deal design

• Which items

• Menu set

Economics of merchant

Page 26

Customers demographics

Early adopters

Likely

Facebook

user

Office

professional

Disposable

income

Urban

females

65% Vietnamese seek promotions while purchasing. Source: Nielsen

Page 27

• 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

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• 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

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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

space 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

Financial

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0

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mil

lio

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Subscribers (m) Customers (m) Groupon sold (m)

Subscribers

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• 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

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Page 33

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4.11.2011IPO

• Raised $700m

• Limit supply to 5%

• Valuation $13b

• Second largest behind

Google (raised $1.7b

in 2004)

• Target price $16-18

• Actual price as chart

Source

http://finance.yahoo.co

m/q/ta?s=GRPN&t=5d&l

=on&z=l

Page 35

Vietnam 2010 (VND trillion)

F&B 19.3

Household

goods &

services

4.3

Transport

7

Hotels &

caring 4.4

Healthcare

3.7

Market Sizes

Page 36

-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.

05

1015202530354045505560

7.5 8.5 9.510.511.512.513.514.5

Pri

ce p

er

Sh

are

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

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590.49 495.46

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Market Cap ($b) P/E

Share Price 24.10.11 Revenue most recent quarter ($b)

Page 38

Forecast

2011

• Revenue 1b

2012

• Revenue 2.28b

2013

• EBITDA 1b

http://www.reuters.com/article/2011/10/25/us-groupon-idUSTRE79O97D20111025

Page 39

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 costLow 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

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Comparisons

Page 41

• Groupon Store

– Self-serving store for merchant

– Scalable

– Revenue stream without investing in sales force

• Groupon Now: what to buy today with Groupon,

location-based, serves impulse purchase

New Services

Page 42

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

Page 43

Acquisitions in South East Asia,

targeting Vietnam?

Page 44

• Groupon acquired Disdus.com Indonesia

• LivingSocial acquires Ensogo Thailand, which also

owns DealKeren Indonesia and has strong presence

in the Philippines

Expansion to South East Asia

Page 45

FutureOpportunities

• 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 $40m

2013: mature market

Market size $100m

(estimation)

Page 46

Success drivers

Operations

Strategy

Strong sale

team

Merchant

manageme

ntReduce cost

of delive

ry

Response to customers, merchants & competition

Quantitatively consult merchants

on logistics: optimal deal size,

discount, maximum number of

vouchers, duration

Page 47

• Billionaire after 2 years

• A retail, not technology game

– How many percent retail market can Groupon take?

– The market is like a bottle. Wholesalers are large stones,

retailers are pebbles, local grocers are sand and online

retails are water. All fill the bottle

• Businesses die and new businesses emerge

What next?

Page 48

What next? (cont)

Travel

services

Delivery

LogisticsPrivate

label

Mobile

apps

Affiliate

Page 49

• A Harvard Business School research

– Merchants with discounts is more likely to be profitable

– Voucher services grow: customers over-rely on vouchers

Research result

Page 50

• 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 amnded S-1 filing

http://www.sec.gov/Archives/edgar/data/1490281/00010474691100

8207/a2205238zs-1a.htm

• Groupon's IPO Roadshow http://www.businessinsider.com/groupon-

ipo-roadshow-slides-2011-10?op=1

Reference

Page 51

• Deal statistics http://dealcuatui.com/thong-ke-deal/

• Nguoi Viet nghien khuyen mai

http://vnexpress.net/gl/kinh-

doanh/2011/07/nguoi-viet-nghien-khuyen-mai/

• Groupon seeks valuation 5 times 2012 sales

http://www.reuters.com/article/2011/10/25/us-

groupon-idUSTRE79O97D20111025

Data

Page 52

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