Group Buying in South Africa

The concept of group buying is a good one. Buying in bulk has always been a good way to save money and sometimes people even form ‘buying clubs’ in order to get bulk discounts. So harnessing the power of the internet to connect people into an ad hoc buying club to take advantage of bulk discounts should really be flawless.

This would explain why Groupon has been so successful in the United States, becoming one of the fastest growing internet startups ever and swiftly expanding to other countries around the world. South Africa is one of the countries that Groupon has expanded to, but not before a bunch of copy cat sites had started up with others arriving shortly after Groupon too.

In fact Groupon decided it would be easier to purchase a going concern rather than starting from scratch and so they bought one of the first group buying sites in SA, Twangoo. Unfortunately for Groupon, the domain groupon.co.za was already (cleverly) taken by another group buying site wicount.co.za. Groupon has been looking at its options and I see that groupon.co.za now redirects to their local site mycitydeal.co.za.

For those who are unaware of how group buying websites work, here’s the low down. The website presents a deal with an attractive discount (ideally more than 40%). The service or product provider will specify how many deals must be sold to make it worth their while. Users can then purchase the deal and only when enough people have purchased the deal does it ‘tip’ and at that point all purchasers will be charged and receive a voucher by email to redeem the product or service at the discounted rate.

This means there is no risk for the service or product provider, nor for the website as the deal is only valid once there are a certain number of purchasers. So everyone wins, the provider gets exposure and feet through the ‘door’, the website gets a cut and the consumer gets a good deal.
So what can go wrong?

From the service/product providers perspective it’s a fairly safe bet. As long as the website doesn’t sell more vouchers than they are supposed to (this has happened), because this can put the resources of the provider under huge pressure. Providers also have to be careful not to devalue their brand. Offering deep discounts on group buying sites can undermine an exclusive or high end brand.
I’m not sure how rigorous the controls are, but there is potential for fraud on the side of the group buying website. If they sell 100 vouchers but tell the provider that they only sold 90, they will only pay the provider for 90 and if the provider is not monitoring how many vouchers are redeemed they would lose out on the additional 10. The group buying site may try to take a share of the ‘breakage’ by assuming that a certain percentage of vouchers will not be claimed and so only paying the provider for a percentage of vouchers sold.

In another scenario, a customer could forward their email voucher to friends who could then also use the same voucher without actually purchasing it. This can only happen if the provider does not have a list of valid vouchers to check the voucher against. This can be particularly difficult if the voucher is for a chain of restaurants or shops. Although in some cases, they don’t mind how many vouchers are used, if they are still making a profit and it brings in more custom.

For the customer, the process is fairly risk free. It can occur that when someone presents their voucher for redemption against a product or service, the provider has not trained the staff on the offer and there can be some awkwardness in trying to get it sorted out, particularly if it’s a restaurant.

The other major problem is that most of these deals have a lot of terms and conditions. Initially this was not the case but it has become the case now. One of the early restaurant deals was a R200 voucher for R100. These vouchers could be used at any time and the customer could redeem more than one at a time. Now the conditions for restaurant deals tend to be more specific, only one voucher per table, only valid on a certain day of the week, etc. So it’s important for the customer to check the terms and conditions of each deal to see if it suits them.

Sometimes the discounts offered are not as deep as advertised. Many times, if you go and check the price of the service, it’s lower than advertised so the discount is more around the 10% to 20% mark than 50%. Alternatively the deal is ‘constructed’ so that there is no usual price to compare it to. Customers must be aware that the deal may not be as good as it first appears.

I spoke to some service/product providers who had offered deals on group buying websites and the feedback was generally positive with many of them happy to offer a deal again in the future. I have also spoken to several customers who have purchased deals and their experiences have also been positive.

I have personally purchased several deals from two different group buying sites and have found my experience to be positive, although research revealed that the actual discount I received was nowhere near as deep as the 50% advertised.

As a user, my one concern is that there are too many group buying websites and this is affecting the quality of the deals. The majority of the deals are for spa treatments and restaurants, when there is so much more out there. The four purchases I’ve made have had nothing to do with restaurants or spas.

There are currently (that I’ve found, there may be more) about 25 group buying sites as well as several one day only deal sites (slightly different principle, where a product is available at a special price for one day and anyone can purchase) as well as several aggregators which pull all the specials off other sites to display them in one place.

There are too many sites and we will see the emergence of dominant players over the next few months. These will be the ones that offer the better deals consistently and don’t resort to pseudo discounts and too many terms and conditions. One of the 25 has already thrown in the towel and several others appear to be non starters. I think there will be some clarity on who the major players will be by year end. I think there is space for maybe 3 big players and some niche players which will specialise in certain products and services eg. Salewine.co.za which focuses on wine.

Citymob.co.za is one of the latecomers, with over 20 sites already launched, the obvious question is what makes this one different. Luke Jedeikin, sales and marketing director at CityMob says:

“We want to refresh the group buying category with a distinct focus on quality, community and strategic partnerships. Group buying is primarily a social activity and in building consumer and retailer loyalty, we believe in mutual respect and consistently sharing local insights.”

Let’s hope those insights push them ahead of the pack. I’ll be watching this all unfold with keen interest because I do believe group buying, harnessing the power of the internet, will benefit us all. It will be interesting to see if the Consumer Protection Act has any effect on group buying as it has provisions around vouchers and the validity periods thereof. Vouchers now have to be valid for a number of years as opposed to the 3 or 6 months we are used to seeing. Does this apply to group buying vouchers?

Below is a list of the sites I know of. Please feel free to comment below if you know if others or share with us your experience as a customer or service/product provider.

www.twangoo.co.za (now merged with Groupon)
www.groupon.co.za (mycitydeal.co.za)
www.wicount.co.za
www.ubuntudeal.co.za
www.zappon.co.za
www.citymob.co.za
www.cityslicker.co.za
www.dailydeal.co.za (not functional)
www.hotdeals.co.za (not functional)
www.Dealson.co.za
www.sweetdeal.co.za (not active)
www.Dealify.co.za
www.skoop.co.za
www.collectivecow.com (Joburg/Pretoria only)
www.bangoo.co.za (not active)
www.ucit.co.za
www.youdeal.co.za
www.vuvuplaza.co.za
www.dealio.co.za
www.justhenga.com (Only Joburg so far)
www.groupbuying.co.za
www.salewine.co.za (only wine)
www.dealaday.co.za (not active)
www.eishcoupon.co.za (not functional)
www.groubo.co.za (not active)
www.247deals.co.za (not functional)
www.sacoupons.co.za
www.dealison.co.za (not active)
www.buywithus.co.za (not active)
daddysdeals.co.za
dealstoday.co.za
www.garethcliffdeals.com
www.voucha.co.za (not active)
www.sugar-rush.co.za (not active)
southafricadailydeals.co.za (not active)
www.gemgem.co.za (deals for kids)
livingsocial.com (no SA deals yet)
www.mobstir.co.za (Johannesburg only)
www.fooddeals.co.za (Johannesburg/Pretoria only)
www.buybargainbuys.co.za (Seems to be focused on PE)
www.dealclick.co.za (Johannesburg only)
www.buyitforward.co.za
www.flook.co.za (sport focused)
www.less55.com
www.dealinc.co.za
www.pigdeal.co.za (mobile app)

Aggregators:
www.alldeals.co.za
www.dealchecker.co.za
www.dealzela.com
www.todaysdeals.co.za (not functional)
www.dealsitez.com
www.dealspade.com
www.mydealsonly.com
www.whatsthedeal.co.za
www.dealzone.co.za
yadda.co.za
www.dealafrica.co.za
www.dealscout.co.za
www.mydailydeal.co.za
www.savemedeals.com
www.mydealgate.com

One Day Deal Sites:
www.24hoursonly.co.za
www.onedayonly.co.za
www.extremedeals.co.za

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65 Responses

  1. Andrew says:

    Nice overview Dax. One thing to look for in some ‘group buying’ sites is the tipping point. If it’s just one purchase to tip a deal, that’s a coupon. The point of group buying is to shop socially, together with like-minded friends who are keen to try new experiences. I would suspect we’ll see more consolidation and collaboration developing in the category, and hopefully more respect shown to vendors offering deals so that they can grown their business with new customers who can become loyal followers.

  2. Foxy says:

    Great, informative post Dax. I have made 2 or 3 purchases via Groupon, and my experience has been positive thus far.

  3. Mary L says:

    I agree with Andrew, if there isn’t a minimum number of purchasers then it isn’t group buying. So UbuntuDeal is cool, but they’re not group buying or social buying. They’re just a voucher site.

    You’ve listed Groubo twice, Justhenga is at justhenga.com not .co.za, and your link to CityMob is broken. Also, these sites don’t work: sweetdeal.co.za, dealify.co.za, dailydeal.co.za, hotdeals.co.za

    I’ve only bought from three group buying sites: Wicount, Dealio and Groupon. Wicount has an awful site but they were cool and I enjoyed the experience. Dealio had amazing service, check their hello peter, but paying was a bit tricky cause I had to create a Payfast account. Groupon was the most terrible experience of my entire life, the deal was overinflated and fake, the purchasing process was fine, but then the redemption was terrible and I ended up having to get a refund. It took me nearly a month and a half to get a refund. Check Hello Peter before buying from anyone, I should have: http://www.hellopeter.com/search_results.php?search=groupon

  4. Andrew says:

    @Mary. Thanks for further details. http://www.getclosure.co.za also good if people have issue they can’t resolve and need more info the CPA (BTW – the site doesn’t extort money from companies in order to respond to complaints, unlike hellopeter).

  5. Jess Green says:

    Good post – thanks Dax. Just a small correction – it’s UbuntuDeal.co.za, although ubuntudeals.co.za points there too.

    @Mary L – UbuntuDeal does have a minimum number on each deal.

  6. Carla says:

    Apparently the retailer only receives their portion of the voucher if the customer actually redeems the voucher. They have to send redeemed vouchers to Groupon and are paid on the number of redeemed vouchers, and not the number of voucher purchased.

  7. Grant Ross says:

    Hi Dax,

    I head the customer service team for Groupon SA. Dax, you point out some very valid points with regards to Group buying as a concept. Groupon is working very hard to set high standards in the e-commerce space and was very disappointed to read Mary’s comment – @Mary,We would very much like the opportunity to investigate the situation you experienced, it is never our intention to over inflate a discount. We are improving systems daily to ensure quick & effective Customer service as well vetted deals which are transparent – if we have failed you here we will do what we can to make good. Groupon is all about exploring your city and being able to enjoy the best of what it has to offer – our team works hard to train vendors and their staff so that Groupon customers receive great service and also that the redemption process is handled carefully. The reason Groupon chooses to pay on redemption is two fold – to protect the customer (make sure the vendor does redeem their voucher) and to protect the vendor (make sure the customers redeem their vouchers). We would love the opportunity to chat to you Dax about the various ways we are working constantly to improve our systems at Groupon. Kind Regards, Grant

  8. Linda says:

    Having tried 4 of these sites my best experience has been with http://www.mycitydeal.co.za. They have the biggest variety of offers, some great deals at real establishments and a seamless purchasing process. It certainly seems they leading the group buying space.

  9. Ryan says:

    Linda: shilling much? If you were genuine you would mention the other sites.

  10. Dax says:

    @Andrew – you say the point of group buying is to shop socially. I don’t think I agree with that. The point of group buying is to use the power of the group to obtain a deeper discount.

    The social shopping element and exposure to new things is a value add which may differentiate a site but the fundamental foundation of discount for volume must be in place.

    @MaryL – Thanks, I’ve fixed those errors.

    @Carla – Thanks for bringing that to my attention. It was not like that initially with Twangoo, but I see Grant has confirmed that Groupon operates like that.

    @Grant – Thanks for weighing in, it’s always nice to hear things from the horses mouth. I’d like to comment on the policy of only paying the vendor on redeemed vouchers. I see that you say it is to protect the customer and the vendor. I don’t really see it being of any benefit.

    The real benefit is to the website because then they keep all the breakage in addition to a percentage of sales. And in fact it creates a risk for the vendor, because if the website is fly by night, they may never be refunded for the vouchers.

    The other danger for the vendor is that the tipping quantity may not materialise. As an example, if I say the deal tips at 50 and the deal closes with final sales of 55. Then only 30 people actually redeem their vouchers from me, I am short the 20 that would have made it worth my while. Then the website keeps the breakage of the 25 as well, so I am short and the website is sitting pretty.

    As a vendor, I would not be happy with that way of doing things. The website also gets to sit on the money the whole time, while the vendor has to provide the products/services at their own cost. When can they redeem the vouchers? As and when or must they batch them, or only redeeem them at the end of the coupon validity period?

  11. Dax says:

    There is another disadvantage to group buying sites for the consumer which I neglected to mention… because your credit card is only charged when the deal tips, they have to store your credit card details.

    In light of the recent news of Sony being hacked and having millions of customers details accessed, do I really trust a junior operation here in SA to look after my details as they should? I’m not sure they can even afford the technology required.

    Lastly, has anyone got any info on the affect of the Consumer Protection Act on group buying vouchers/coupons and expiry dates?

  12. Crystal Espin says:

    After having a horrific experience with a voucher I bought from Twangoo I won’t be buying vouchers from group buying sites any time soon. I took the matter up with Twangoo and was assured that the matter was being dealt with. They made a big fuss at first but now it’s been 2 months and they haven’t contacted me to sort out my problem since. I bought a spa voucher and was left with scars from a poorly trained therapist and I feel that there is little protection of quality for the consumer buying the vouchers. The concept of introducing consumers to new places sounds great but these websites can’t guarantee quality service from the vendor.

  13. Helen says:

    One thing to mention on the Consumer Protection Act, a voucher may NOT expire until the earlier of the date on which its full value is redeemed or 3 years after the date upon which it was issued. Therefore vouchers can expire within 3 months etc. Not sure if the group buying sites have taken this into account.

  14. Helen says:

    Apologies, vouchers cannot expire within 3 months

  15. Grant Ross says:

    @dax
    With regards to why Groupon pay vendors on redemption: We mentioned that this is for the protection of the vendor and customer. Let me elaborate, vendors inform Groupon which vouchers have been redeemed at whatever interval they wish (hourly, daily, weekly, monthly) and at that point we begin the process of paying the vendor out for that batch of vouchers. We continue to pay vendors in batches based on actual redemption and as Groupon is informed. This process allows Groupon to fasciculate a risk-free process for both the vendor and customer.

    There specific reasons why we work like this:
    1. GROUPON IS A RISK FREE MARKETING OPPORTUNITY – vendors pay nothing to be promoted on one of the top websites in this country with extensive online marketing campaigns running 24 / 7 which on the day of their promotion drives huge awareness for their brand – a quick alexa.com review will prove this. The vendors we promote only incur the cost of the products and services when the customers redeem their vouchers, at which point we process the payment to vendors – this ensures that input and output costs are aligned. Groupon has extensive marketing campaigns running 24 / 7 and we invest many millions into promoting the vendors we work with via these campaigns. We therefore incur significant costs acquiring new customers on behalf of the vendors we promote during the time of their promotion.
    2. WE PROTECT BOTH CUSTOMER AND VENDOR INTERESTS – Groupon needs to facilitate the process, if we processed full payment to vendors at the close of a deal we have no way of assisting Groupon customers if they don’t receive the service they paid for or the vendor has closed down. We only work with credible vendors and have a dedicated quality assurance team vetting the credibility of all vendors we feature however even some of the most creditworthy vendors in this country have closed down in these challenging times. In addition we promoting the services of services and humans aren’t always perfect meaning we do have unhappy customers from time to time regardless.
    3. OTHER PAYMENT TERMS – As you correctly point out many sites are “fly by night” and so payment terms can offer immediate payment terms to win over vendors and secure an offer. This is not in the consumers interests and additionally this also ensures that Groupon is well aligned with the CPA.
    4. REDEMPTION PERIOD – Groupon has consulted with several legal and regulatory experts on the CPA act. The validity and process we follow is in line with the laws of South Africa.

    With regards to Groupon payment security, as a global company operating in over 50 countries we have the best security measures in place and leverage off international best practice. If we honest though credit card fraud is a risk both online and off, this is unfortunately a reality of the times we live in

    @Crystal Espin, Hi Crystal – We have spoken to you directly, facilitated discussions between you and the Spa even though a full indemnity was signed between you and the spa. We do remind readers that while we promote the services of credible vendors there are sometimes service or quality issues regardless. We have a dedicated customer service team who deal with all queries via phone or email and ensure issues are resolved. We do have legally binding agreements in place which outline obligations of all parties involved. As a global company with established systems and resources we always go out of our way to resolve any Groupon customers complaint.

    As mentioned above Groupon is constantly improving systems and fascinating the process in the way we do to provide protection for customers and vendors.

  16. Anon says:

    Helen, Dax: the CPA is there to empower consumers and to force suppliers to build relationships with their customers and start giving them the service delivery that is so clearly lacking in South Africa (see, for example, the comments some people have made on this post alone). The spirit of the CPA is one where suppliers provide solutions. I am one of the directors of one of the bigger social buying sites in the list above, and that is the spirit in which we operate. Whilst it can be argued that purchasing a voucher from us is purchasing a prepaid device, the same could be said of a ticket to a show where you don’t book for a specific date. You buy a ticket to go to any one of the three days that a show is on; if you don’t go you can’t demand a refund in 3 years time. Similarly, if you buy a voucher for a restaurant it is because you plan to go in the period indicated in the deal fine print, and because that is the period in which the restaurant is preparing that particular dish (perhaps a winter special). We are extremely focused on customer service, and have gone out of our way in the past and recently to reimburse customers that have had a poor experience from a merchant or have had any other issues, almost always at our own expense. If a customer had to come to us in 3 years with an unredeemed voucher, chances are we’d make a plan for them. We don’t have huge margins, and instead choose to pass the savings our merchants give us on to our users. We also pay our merchants for the vouchers that have been purchased, whether they are used or not, so that they earn the money they expected to earn out of the exercise. We do all of this in the spirit of the CPA and as a way of establishing a good reputation in an industry already marred by shocking service, over-inflated “deals”, and non-delivery. Whilst Dax can see my email address, I’d prefer not to say which site I’m involved with (no, it isn’t Groupon) – let time and good experience establish the companies with excellent reputations.

  17. Lewellen says:

    Aaah. I understand how Groupon works. They’ve hired a robot to interact with customers. Here’s my “Groupon Guide to Interacting with Customers” –

    – ensure you use “Groupon” in every sentence, as in “Groupon wants to assure Groupons customers that Groupon takes all Groupon complaints as Groupon seriously as Grouponpossible.”
    – use buzzwords to create buzzstatements: “this ensures that input and output costs are aligned” (we’re just missing something about integrating our vertical synergies so that we add eyeballs to the new media paradigm shift)
    – make vague statements that nobody can confirm: we have the best security measures in place (I’m sure Sony thought that too)
    – CAPSLOCK IS AUTO-PILOT FOR COOL (plus it lets you subtly insult everyone by being completely condescending)
    – make sure you brag about how awesome Groupon is at least every three sentences: “we invest many millions into promoting the vendors” and “as a global company operating in over 50 countries”
    – above all, never admit that you’ve done anything wrong. The 30 complaints on Hello Peter (21 against Groupon, 5 against Twangoo, 4 against MyCityDeal) are all imaginary.

    I think you’ve reached the pinnacle of bad service when you have a nickname – think about Telskum/Hellkom. Congratulations, guys, I spoke to some of my friends and found out you’ve already earned yours: Poopon. I’m sure there will be many more nicknames to come. Soon you’ll be right up there with the four major banks and Altech Autopage!

  18. Simone L says:

    jess i dunno, all ur deals say the deal is on after 1 person buys. and todays deal says “We need 1 more people for the deal to be on.” that isnt a group of people, so no group buying. three’s a crowd:)

  19. Jess Green says:

    Hey Simone L – not all our deals say this by a long shot, I presume you’re looking at the current deal. Nevertheless, I agree with getting the numbers up.

  20. Andrew says:

    @Dax – socialising the shopping experience is a necessity to group buying and will become even more so going forward as the ‘tipping points’ get bigger and mobile is included into the buying category. As much as you don’t get a deal until enough ‘friends’ participate, it’s the urgency of the deal and the minimum number of participants that make it interesting and may spur friends to actual act on the question “what are friends for?”…

    @Dax – you are right about examining the payment policies of group buying sites. I would be keen to see a comparison of how they stack up against each other. To me, Groupon’s policy sounds a bit unfair to the vendor.

  21. Olivier says:

    I am Olivier of CitySlicker, a daily deal site launched a few weeks ago.

    In Europe where daily deals have existed for a bit longer than in SA, I have seen a few merchants “disappear” after cashing in the sales made by a daily deal site that paid merchants in full right after a deal. Voucher holders then rightfully turned against the daily deal site that did not protect their interests. The “Groupon” policy avoids this.

    I am not saying it is a perfect policy, but it is designed around protecting the interests of both the consumer and Groupon from a valid, proven risk (merchant disappearing or defaulting on service).

    In SA, we regularly meet merchants who have worked with Groupon. They do not seem particularly unhappy about Groupon’s payment policy or payment schedule (I wish they were, as CitySlicker’s payment policy is actually slightly different…).

  22. Faraaz says:

    Im fascinated by the sudden appearance of a handful of compliments on Hello Peter for groupon since this article came out and the comments started flowing. Dont try cut your own deck guys. Youll get caught and made a mockery of by people and in the press.

  23. Derrick and Beverly says:

    I Puchased 10 vouchers for Shark Cage diving through YouDeal.co.za for our wedding party and saved R9000. The customer care was excellent. When I called the call centre I spoke to a human not machine, emails were responded to in minutes.

    As long as I keep scoring deals like this, I ll keeping supporting the Group Buying model.

    Keep it up guys, i ll always support the underdog!

    🙂

  24. Mark says:

    I have purchased a hand full of coupons on ucit.co.za and the experience on a whole was a positive one. Will definitely continue using them in the future.

  25. Lewellen says:

    I’ve prepared a cut-and-paste script for people that own a group buying website to use when commenting on group buying articles. If you’re going to shill I might as well make it easy for you. Please feel free to use this on other blogs – just pick one of the phrases from the sets of choices:

    I recently/always/mostly purchase(d) some/a bunch/a whole lot of coupons/vouchers from this amazing/awesome/delicious group buying website (insert your website name here). The entire/whole process/experience was fantastic/blazing/perfect/superlative/hephalumpific and I would definitely/absolutely/positively/most assuredly purchase from (insert you website name here) again. Also their customer service/user support/phone line is the best/most bestest/cleverest/radest in the whole world/country/province/city/hamlet.

    • Dax says:

      I’ve added 247deals.co.za and sacoupons.co.za to the list.

      I received emails from them on an old address which means they have both recently purchased a mailing list.

      • Jason says:

        247deals.co.za … website no longer exists and merchants are not honouring their offerings. If it is once bitten, twice shy – what if it is many bites, …….

        Do we have any recourse? Even if it is to have the responsible persons be held accountable civilly or criminally?

        • Johnny says:

          Hey Jason,

          You are so right! 247deals just split and left hundreds of people wondering what the hell happened and how do they get there product/money back…
          Regarding getting recourse or holding the people responsible/accountable, all I can say is that I agree 100%. The person who should be responsible is of course the owner of 247deals. His name is Jerry Biti and the company’s name is Gambit. They have a similar website in Australia – maybe people should at least go to blogs in Australia and warn people there as well…. Anyway, here are some details that my friend managed to get – hope that it helps:

          Their skype name is: gambit.group1.
          Relevant emails that might still work:
          jerry.biti@gambitgroup.com.au *manager)
          lee.h@gambitgroup.com.au (joint manager/investor)
          shirish.a@gambitgroup.com.au (assistant manager)

          Best of luck
          Johnny

  26. Dax says:

    Thanks everyone for your comments. Since posting this article, I’ve also had some interesting conversations and many emails from people who own a group buying website, work for one or have used one.

    There seems to be a variety of policies around vendor payment. I understand what Grant of Groupon is saying in terms of protecting the vendor and client, but it doesn’t answer the question of how do you guarantee the vendor sees the amount of coupons redeemed to make it worth their while.

    Tha fact that Groupon keeps all the breakage and holds the payments until redemption means their business model is the most profitable. When I met with Twangoo in the early days, this is not how they operated. They gave the vendor the total number of coupons sold x coupon value – their commission at the close of the deal. It seemed to me that the commission is competing with the discount. So you could either offer a 40% discount and take 10% commission or a 45% discount and take a 5% commission, but there has to be a reasonable commission otherwise it’s not viable. My opinion was that the site needs to get the breakage to make it viable, which is exactly what Groupon does. But I couldn’t answer the question of how to ensure the vendor gets the minimum number of deals they require to make it worth their while and it looks like Groupon can’t answer that question either.

    This is particularly dangerous if the site decides to inflate the amount of coupons purchased. There have been accusations of this happening already, but no proof. With Groupon’s model, if they need to sell 50 coupons to tip the deal, but they have only sold 45, what is to stop them from pretending that 50 have been sold and the vendor will be none the wiser because the additional 5 coupons will be included amongst the other unclaimed coupons.

    There is serious motivation for this, because if a deal doesn’t tip the website loses all of that commission. Too many ‘untipped’ deals will be really bad for business and also lead to unhappy customers and vendors. With no way of getting caught, who is protecting the vendor from the group buying site?

    Some of the other sites pass the breakage onto the vendor by paying them upfront for all coupons sold, others split the breakage when the vouchers expire. There are a variety of policies and I think the vendors will decide which ones sound like a good deal to them.

    The other issue is the commission. Some sites charge a large commission, others a small commission. Again, the vendors will have to decide whether it sounds like a good deal to them.

    I’d be interested to compare the various policies in terms of payments and commissions for all group buying sites. If you own a site, please feel free to email me your policy and let me know if you are happy for me to include it in a comparison with or without the site name.

    Other comments have been around the sales people for the various sites. Some vendors have said that the have found some of the sites pushy and arrogant, while others are helpful. So I assume this is another factor vendors will consider.

    Some of the sites have said they investigate their vendor’s pricing claims by phoning in for quotes anonymously to check that they can’t get a similar deal without using a group buying site. This is in contrast to Groupon which has a fairly bad reputation overseas for inflating the stated discount. See more details here : http://www.asa.org.uk/ASA-action/Adjudications/2011/1/MyCityDeal-Ltd/TF_ADJ_49579.aspx

    Discount inflation is rife here already, and I have experienced it myself. Customers will support the sites where they feel they are getting a truly good deal. If they find out the discount has been inflated, they will not trust the site in the future. Also, if the terms are to specific, that will also detract from the customer experience. I have seen good restaurant deals advertised only to see that they are only for lunch time and during the week, which is actually quite pointless. Who has time to have 3 course lunches during the week?

    Group buying sites will tell their vendors that they are offering them good exposure but I wonder how the exposure differs between the various sites. Groupon came to the party quite late, giving some of the smaller sites time to attract a larger audience.

    There was an interesting development this last week when CityMob and Zappon ran exactly the same deal on exactly the same day. However CityMob offered a 55% discount and Zappon offered a 50% discount. Once they became aware of the situation, they both upped their discount to 60%. The deal on both was set to tip at 20 and by the end of the day, Zappon had 5 and CityMob 11 sold. At the end of the 3 days, citymob had sold 22 and Zappon only 11 which means the Zappon deal did not tip. CityMob is a relative newcomer and most likey does not have the resources that Zappon has and yet they had twice the response. If we can trust that those were all real purchases.

    I recently received emailers from two group buying sites at an old email address which I know is on an email list available for purchase. I’m not sure how positive people’s impression of a website or vendor is when they receive unsolicited email like that.

    Group buying is a very competitive space right now and the barrier to entry is low. Starting up a group buying website is not expensive. However due to the competition there seems to be some dodgy things going on and negativity around the whole concept seems to be growing. Let’s hope that things settle down quickly because group buying can be a very useful thing.

    I think that sites which can focus on a niche or a unique strategy, eg. creating unusual and interesting experiences, will do better. And those that offer good service and real value to both vendors and customers will move to the front.

  27. Jonathen says:

    Hey Dax,
    Thanks for the interesting and well covered article.
    as someone already corrected the link was broken and some of the websites aren’t relevant..but no biggie…
    also, you can add another website that is coming out soon (truth be told I know someone who works there…)
    the site is: http://www.dealison.co.za/
    in my opinion it looks really good. I wanted to see how they were before recommending so I read around the site. The FAQ looks respectable and their terms of use and privacy or serious too. seems like they are serious about getting into the game. we will just have to see how there deals and customer service are. they should be fully running by the end of may.
    Thanks again
    Jonnie

  28. Dax says:

    Thanks Jonathen, I’ve added dealison.co.za

  29. Dax says:

    Some interesting articles on Group buying:

    This one is about the negatives of group buying
    http://tcrn.ch/m0Mt74

    This one is about Groupon’s less than ideal financial situation
    http://bit.ly/lsbM0B

  30. Dax says:

    I’ve added buywithus.co.za and daddysdeals.co.za

  31. Dax says:

    Another interesting article, this one about the dodgy past of the founder of Groupon http://bit.ly/jlA9zo

  32. AJ says:

    Dax thanks for the mention – There seems to be a new site opening every day. When the consumer is not obtaining a point of difference i think he / she might get tired. I am sure that there will be a clear out soon – some sites have been collecting names for a while and cant get off the ground. Specialist sites mast be the way forward. Salewine has been around almost 12 month now and still grows.

  33. patrick komandie says:

    Hey AJ – why is it called SaleWine and not Wine Sale? And how does it differ from GetWine? Also, why can’t I see your specials without having to log in? I love wine and buy monthly.

  34. Jess Green says:

    Hi Dax

    I’m replying to your tweet that only 18 of the 30 sites listed above are actually active. This is normal for a new industry.

    My only comment I wish to pass is that operating group buying sites need to offer a good and proper service, as opposed to a quick deal with an unhappy vendor. This will of course improve the industry for all involved. Specifically on payment, I cannot any longer understand the “redemption” model of paying only once coupons are sent by the business that offered the deal. Not only is this an admin nightmare, but also not fair on the business.

    Consequently, UbuntuDeal pays the full amount. Does anyone else do this?

  35. raymond says:

    we did a deal with dealio a few months back and they pay out the full amount as well. we decided to go with them instead of myshittydeal because of the admin nightmare. plus groupon in the states pays out breakages, so i dunno why they dont do that here. i guess groupon here is just greedy.

  36. steven says:

    once again it is a shame that “private people” are using this article to promote or belittle other websites. I personally, as a customer of numerous coupon websites, am happy that the full sum is not paid, the simple reason being that this provides protection for the consumer. If a merchant has a legitimate business running he shouldn’t be worried that he is only getting a certain percent up front. The problem is, what happens if the website pays everything upfront and then the merchant closes shop or refuses/can’t supply the prouduct? where does this leave the customers? from a few articles that i read in american online journals, the best method is a combined one (some of the money upfront and some based on coupon redemption).
    now can I be like all the other fake “private people” and write: “I love X site because they are so good and pay everybody so much money”…it’s time all these fake commentators respect the intelligence of the SA customers. We know that whoever is commenting is doing it for the benefit of their website – so enough….

  37. Jess Green says:

    @steven – comments from anyone not identifying themselves properly are useless anyway.

    Regarding payment, threatening to not pay a vendor doesn’t stop them from not allowing redemption. In fact, this whole redemption model is massive admin for the group buying site and business. Just ask a few businesses when you redeem your coupons. Mostly, they are unhappy.

    The point is that there are three parties here, and all need to be satisfied. Why should a vendor not share in the money made from a coupon sold if someone doesn’t redeem it? Why should only the site keep this money? And why would people not redeem the coupons?

  38. raymond says:

    steven dude, he asked if anyone else does this. i know for a fact that groupon here doesnt, because my partner wanted to run with them. i hear what youre saying, but as a business we didnt think about that. if the website we run with doesnt think about that we cant help them.

  39. Olivier says:

    Hi all,

    To make it clear: I work for a daily deal company that competes against Groupon in SA, and I have done so in Europe before.

    Groupon’s policy to pay only for redeemed vouchers enable them to do this:
    http://www.wisebread.com/how-to-get-a-groupon-refund-when-a-company-closes

    This is not an isolated case. I have witnessed it a few times in Europe. When it happens to a deal site that controls for redemption of vouchers, refunds can be issued in no time.

  40. steven says:

    Olivier, you are 100% correct. No one is saying that “threatening to not pay a vendor doesn’t stop them from not allowing redemption” – what i am saying is that if some of the money is kept by the website and old paid upon redemption then at least if the merchant goes bankrupt or refuses to redeem then the website has money to reimburse the customer.

  41. Jess Green says:

    @Olivier – We would also refund if that happened, it would be our responsibility, since the coupon is bought on our site. You mention above that you pay in a special way, what is that?

    If redemption is the only way for some sites to make sure things work, then so be it. However, with some restaurants trying to gather hundreds of coupons and the admin of relaying this back to the group buying site, the vendor loses out in both time and sometimes money.

    Can anyone answer this: Why doesn’t the business receive their full share at the end of the validity of the coupons?

  42. steven says:

    Jess,
    What exactly do you mean “the end of the validity of the coupons?” do you mean once they prove to the website that the coupons have been redeemed? If so, then the reason is for the safety of the merchant…if the website goes under (and yes, this is a possibility) then the merchant stands the chance of losing money for coupons he has already redeemed.

  43. Olivier says:

    @Jess: We use a mixed payment policy (part prepaid, part paid upon redemption). I am happy to share it with you in person as UbuntuDeal is a very decent and fair player in SA but won’t put it on a public website (hint: give me a call).

    Ultimately we want each merchant to check each voucher that is redeemed (voucher code) to avoid any fraud by consumers and to be alerted if redemption is poor for a given deal. Granted, it is a bit more work for the merchant than just cashing 100% of proceeds, but it seriously limits potential problems for all 3 parties involved later on (deal site, consumer and merchant).

  44. Jess Green says:

    @Olivier – that is very similar to how we pay – we don’t pay the full 100% upfront, but we do make sure they see their full amount if they follow procedure. And, I fully agree with your comment – good to know we are like-minded on this – génial!

    All I want to point out here is that it is unfair for the site to keep monies for unredeemed coupons, and that there are many unhappy businesses out there that agree. We have spoken to many that do not like the major admin of the redemption model. Also, this lends itself to a site having monies that are not theirs which they could potentially mismanage.

  45. Great post Dax.

    I recently investigated advertising my Pilates studio on Groupon and was taken aback by the contract I needed to sign. It is a 24 month contract and Groupon is entitled to rerun the deal in that time period, something like once per month. I was told I need to offer a 50% plus discount and then Groupon would take 50%…all good and well. But then the service provider only gets paid out once the voucher has been redeemed and sent back to Groupon and then you get paid out. That is the part that convinced me not to use the site!

    I will not use one of these sites again on principle. I have in the past purchased a voucher on Groupon. The purchasing part was slick but then when i wanted to go to the restaurant at 6pm on a Saturday, they told me they where fully booked (i told them I had a voucher over the phone). I convinced them that we would be 1 hour as we had tickets for a show and they let us come…to there completely empty restaurant! The staff seemed irritated with us and when we asked for water instead of the 2 glasses of box wine included in the sushi deal, refused us. I can understand that they felt done in buy the deal and thus no incentive to treat us well. I would rather pay full price for a service and get the happy provider to do their job with love.

    Justine Seymour

  46. Karisa says:

    Today’s deal on Dealify:

    3 course meal at Constantia Uitsig Restaurant with one glass of wine… Price: R225 (Value: R450). The catch is it’s a set menu, so I decided to check on their website to validate that this deal was actually worth the R450 they claim.
    Starter: Tomato tart – R75
    Main: Chalmar Beef Fillet – R155
    Dessert: Creme Brulee – R65
    Glass of house wine: I’m guessing about R30.
    Total then is: R325. So where did they come up with R450? Unless the restaurant is going to claim that the prices on their website isn’t current… but it smells like a dodgy deal to me! Sure you’re still getting it cheaper, but they are definitely over-selling the discount you’re getting. Tsk Tsk.

  47. Robert says:

    Hi Dax,

    Nice review. good to have all the info in one place…so many new websites I really wonder where the market is going…
    anyway, just wanted to mention that I found a new coupon aggregator website. I inserted it in here with a link for viewers convenience if that is ok with you. The site looks pretty good. I personally liked the lay out, the various filtering options and mainly the fact that you have all the info in one place unlike most of the other aggregators that show you each website’s deals separately. I did find a few things on this site that still don’t work but maybe its because they are in beta. Also, I didn’t like their logo..seems a bit unprofessional…but hey, I guess the important thing is the deals and the convenience right…oh and the fact that its free of course (I know, I know…i’m cheap…but who likes paying for online services…)

  48. Rachel says:

    Hi Dax,

    Can you please add two new websites that I found – both really nice I think: http://www.gemgem.co.za (coupons for kids stuff) and http://www.dealafrica.co.za (aggregator website).

  49. Keith says:

    Sugar-Rush is now active

  50. Cedric says:

    @Keith – dude, that design is horrible. You seriously can’t expect to compete in the industry with a design that shocking. The site is littered with spelling and grammatical errors, and you used Comic Sans as the body font on one of the deals. Aaaand your deals are crap.

    But all of that could be somewhat excused if you DIDN’T STEAL YOUR LOGO FROM A LEVI’S ADVERT. http://www.thecoolhunter.net/article/detail/1530/levis-paint–fashion-for-walls

    Someone needs to tell TBWAHuntLascaris (TBWASouth Africa) about this, since it’s their Brussels sister agency that created the advert. Has Michael Bramwell never heard of copyright??

  51. Ben says:

    GroupBuying.co.za is up again and provides information and a forum place for the industry. Take a look.

  52. FoodDeals says:

    Hi Dax, it would be fantastic if you could ad http://www.FoodDeals.co.za to your list! (btw., we’re still looking for affiliate partners that run websites with focus on dining and wining, respectively food).

  53. DealScout says:

    Hi Dax

    We’re about to launch a South African daily deal aggregator.
    It would be great if you could add DealScout (http://www.dealscout.co.za) to your list!

    Thanks

  54. Jason says:

    Hi Dax,

    two more sites that exist and are not on the list are: http://www.dealclick.co.za (daily deal site that launched about a week ago i think – great desgin!) and http://www.dealafrica.co.za (aggregator – launched about 1 month ago – great layout and filtering options).
    would be nice if you could add them.
    Thanks
    Jason

  55. Nisha says:

    Hi Dax
    Would you also add mydailydeal.co.za to your list of aggregators.
    Thanks
    Nisha

  56. Craig says:

    Hi All,
    Please have a look at our site http://www.mydealgate.com/ , we have a new addition to the site that i am sure is going to be very beneficial for the consumer. So keep your eye on the site.
    Kind Regards,
    Craig Langford

  57. Hi Dax

    I’ve tried a number of the group buying sites and have had generally quite positive experiences.
    I know people are quite quick to slag Groupon, but the vouchers I’ve used from their site have been the best for Cape Town restaurant specials.

    🙂

  58. Craig says:

    Hi Dax,

    Our site is launching on the 02/09/13

    I will be keen to hear what everyone thinks about it. We are the first Group Buying site to offer Merchant Rewards and User Rewards on purchases made up to three levels down.

    Have a look at our video on the benefits for the Merchant

    http://www.yuppyliving.co.za/merchant_how_work.php?ideas=1

    and our Users

    http://www.yuppyliving.co.za/how_it_work_user.php

    Look Forward to Comments

    Regards
    Craig Langford
    YuppyLiving

  59. Brad McWilliams says:

    Hi Dax
    How up to date is this list?
    Regards
    Brad

    • Dax says:

      Brad, I’ve been updating it as time passes. So it’s pretty comprehensive but I think many of them have shut down and I may not have noted those.