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Bargain Dining with Online Group Coupons There may be no such thing as a free lunch,

Bargain Dining with Online Group Coupons

There may be no such thing as a free lunch, but you can easily score a meal for half-off at a number of daily group-buying websites.

Bargain Dining with Online Group Coupons There may be no such thing as a free lunch,
Bargain Dining with Online Group Coupons There may be no such thing as a free lunch,


  • M any consumers in Taiwan, like those in other markets, are making use of coupons from

group-buying websites to save money on their purchases – including dining out. Basically, the websites offer discounts of half-off or more on products and ser- vices, including restaurants, salon and spa services, travel and hotel packages, local delicacies, and even electronics. But the catch is that the offers are only active for about 24 to 36 hours, and they only become valid if enough customers agree to the purchase. If the number of pur- chasers has not reached the minimum, the deal is off. The concept started very much as a type of “social commerce,” meaning e-commerce that harnesses the power of social networks. Eager customers would ask their friends to join them in making a purchase to increase the chance of getting a discount, and the deal would spread via word-of-mouth. But the popularity of these websites has increased to the point that the “social” part is unnecessary – enough customers visit the websites on their own to trigger the offers. Theoretically, the concept offers a win- win situation for all parties involved. Cus- tomers can choose from a large variety of deals on goods and services, merchants get brand exposure, and the websites take a cut of the purchase price for each deal

sold. “It’s like the online version of the television shopping network,” says Jerry Kuo, CEO of Groupon Taiwan. The recent popularity of these daily- deal websites means that shoppers in Taiwan have several platforms from which to choose. The main players:

Groupon Taiwan

The largest company in the field, Groupon Taiwan, underwent an initial public offering (IPO) in late 2011 and holds the leading market position both in Taiwan and worldwide, with oper- ations in more than 500 markets in 45 nations. Launched in November 2008 in Chicago, the company quickly flour-

Jerry Guo photo: Groupon
Jerry Guo
photo: Groupon

ished, expanding its properties to the point of attracting a 2010 buyout pro - posal from Google. Groupon quickly rejected the offer and countered by expanding on its own. It entered the Asian market in December 2010 with three website acquisitions, including Tai- wanese social networking website Atlas Post (地圖日記), at that point the largest contender in the market. “Groupon’s customers seem to be willing to spend more money than cus - tomers from other websites, who seem to favor lower-priced deals in the NT$100- 200 range,” says Peter Hsu, General Manager of Red Onion Steak (紅洋蔥牛 排 ), which has partnered with Groupon on numerous occasions. “They were very efficient. If we discuss a deal today, it could go live maybe next week.”


The second most popular website, and continually increasing its market share, is GOMAJI, which was founded in June 2010 and focuses on innova - tion and technology. Not only was it the first group-buying website in the Taiwan market to release iPhone and Android apps, but GOMAJI also offers partnering merchants a MyPad tablet for real-time coupon-code entry. While other opera -

january 2012 • taiwan business topics


coupons Gomaji - Victor Chang photo: Aimee Won G
Gomaji - Victor Chang
photo: Aimee Won G

tions require merchants to collect printed- out e-mail verifications or keep a written record and send the information in at the end of the redemption period, delaying payment by as much as three months, GOMAJI’s MyPad entry method means that merchants can simply read the code from the customer’s mobile phone, enter it into their MyPad, and receive payment within three days. For small businesses with limited operating capital, that speed is a big boon. Another tech advance is GOMA - JI’s mobile app 我餓了 (translation: “I’m Hungry”), a feature that uses smart phones’ GPS capabilities to locate shops with smaller (20% off or so) instant dis- counts in close proximity to the user. Users can purchase the deal on their smart phones and immediately show the code in the restaurant to redeem the offer. If the voucher code is not redeemed within eight hours, it is automatically refunded. The system is perfect for times at the office when faced with the inevi - table question: “Where do we go to eat today?” For merchants, offers an opportunity to give smaller discounts that still generate a profit. Yet another unique feature of GO- MAJI’s service is its colorful photo-filled magazine, featuring the more successful restaurant, hotel, and entertainment deals from the previous month. The maga - zines are sold at retail outlets including 7-Eleven and the Eslite and Kinokuniya bookstores. It’s an additional endorse - ment opportunity for successful mer- chants at no additional cost. “We ran parallel promotions at both Groupon and GOMAJI, but GOMAJI

was much more effective for us,” says Steven Wu, CEO of Toscana Bakery, a European-style bakery specializing in arti- sanal breads and pastries. “Not only did GOMAJI sell more vouchers, but its cus- tomers spanned a broader demographic and the company itself didn’t take such a large cut of the sale price as commission.”

Yahoo! Discount

But if you think group-buying offers are only for new or small businesses, think again. At Yahoo Discount (Yahoo 折扣 ), past successful offers includes hotel rooms at The Regent Taipei and Silks Place Yilan, and food vouchers for Ding Xian 101, Domino’s Pizza, and Silks Palace at the National Palace Museum. Although the company entered the group- buying market late, with its first offer coming in May 2011, Yahoo arrives with abundant e-commerce experience and consumer behavior know-how. In addi - tion, it can promote the business through its existing marketing channels such as its lifestyle platform, Yahoo! Lifestyle+ (Yahoo!奇摩生活 +), which makes restau- rant recommendations, and its blogging platform, “After observing the existing group- buying websites on the market, we dis - covered that there was still a portion of customers whose needs have yet to be met,” says Eddie Tsai, Director of Yahoo! Kimo Discount+. “We plan to release products that as of yet have been inacces- sible to consumers, namely, brand-name products.” S o m e o t h e r p l a y e r s i n t h e

Taiwan market are 17LIFE (17P ,; Lashou ( 拉手 網 ,; Nuomi ( 糯米 網 ,; Jigocity (集購城 ,; 123 (123團購 網 ,; 17shopping (; and yam (揪便宜 ,

Who are the users?

As with most e-commerce websites in Taiwan, female users make up the majority of customers. As a result, deals are generally catered to this audience, with most falling into the categories of restaurants, spa and salon services, and travel. Anita Chen, Managing Director of Park Strategies Taiwan, a U.S.-based lob- bying firm, has used Groupon Taiwan to purchase restaurant meal vouchers. “Usually the prices are a substantial dis- count from the usual prices,” she says. “It’s a good way to try new restau - rants for less money. I haven’t used other group-buying websites so I can’t make any specific recommendations, but I think Groupon has a much wider range of deals than its competitors.” For merchants – especially small to medium-sized service-based businesses – the benefits can also be substantial. The daily-deal websites enable them to utilize idle resources and gain marketing oppor- tunities with no upfront cost. Companies with the greatest amount of idle resources – restaurants, hotels, spas – have nothing to lose by offering those empty seats or rooms at half price, which would other- wise be costing the business money. “We don’t think of merchants as our clients – we’re a partnership,” says Victor Chang, head of New Business Develop - ment at GOMAJI. “We handle the mar- keting part, putting it on our website and making the upfront investments in time and technology. But once we get those 1,000 people into the restaurant, we hand it over to the merchants. We remind them that these are your customers – they’re not our customers. If you give them excellent product and service, next time they’ll come back and pay full price.” But offering a daily deal on a group- buying site has its challenges for mer- chants as well. Stories abound of small

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companies that were actually put out of business by the success of their group- buying deal. They received such an influx of new customers that they were unable to keep up. Others have been forced to make adjustments. Red Onion Steak, for example, began splitting its lunch and dinner service into two seat - ings on weekends in order to serve more customers, and the restaurant now requires advance reservations to make sure they have enough ingredients on hand to meet the demand. Sometimes the restaurants’ available staff and materials simply aren’t suffi - cient. “Because of the demand from the vouchers, I had to hire bakers to work overtime making additional breads and pastries,” says Toscana’s Steven Wu. “Our bread isn’t like that from other bakeries, which is made in a factory by machine. It’s all artisan bread, hand- made, so selling more means that many additional hours of work.” Another risk for the merchants when using group-buying websites is that cus- tomers may come in only to redeem the voucher, with no intention to peruse other products or return at a later date. Peter Hsu at Red Onion Steak tries to head off this problem by giving customers a VIP card, good for 2-for-1 pricing on entrees, when they pay their bills. Hsu’s successful partnership with Groupon goes back to the Atlas Post days, and includes about 10 offers over a span of two years, each time selling two to three thousand vouchers. He especially prides himself on the U.S.-imported aged beef used in the restaurant’s Western- type menu, which includes several cuts of steak, as well as German-style pork knuckle, grilled chicken, and fish. “I have about a NT$250-280 base cost per cus- tomer, including the cost of rent, elec - tricity, employee salaries, etc. But I pay that cost regardless of whether or not there are people at that table. Even with the group-buying deals and the VIP card offers, we’re still able to turn a profit just due to the sheer number of customers. New customers come because of the voucher, but then they want to come back again. That’s how you make money. But in order to do this, your restaurant must have good food and good service so they


will want to keep coming back.” Toscana Bakery was started by Steven Wu, who was born and raised in Taiwan and then went to Nigeria as a young man to seek business opportunities, eventually building a prosperous bakery chain of over 60 stores. After 25 years and a suc- cessful business in Nigeria, last year he decided to return to Taiwan and try his hand in his own homeland. Steering away from traditional “Taiwanese-style” bread, he instead offers hand-baked European- style artisan bread and pastries, such as Toscana’s signature sweet basil bread and custards. He imports ingredients and equipment from Europe and the United States, including an expensive German oven proudly displayed behind a glass window, allowing customers to view the entire baking and packaging process. “Before the offer, on an average day our store sold 30-40 custards, but after that we’ve been selling 3,000 six- count boxes, so about 18,000 custards per day. The difference between 40 and 18,000 is so huge – no matter how low your margin is, you still turn a profit. On top of that, within 24 hours 3,000 more people know about your shop.” “I think of it as a marketing cost,” says Hsu. “Advertising can easily cost

more effective depending on a business’ goals, group-buying websites offer com- panies large-scale exposure with quick return. Moreover, the results are measur- able, replicable, and can be easily evalu- ated for effectiveness. “When using the Groupon model, it’s very easy to evaluate the performance of a deal. Merchants can see exactly how many people have purchased a voucher and will go to their store,” says Jerry Kuo. “But for traditional advertisements in magazines and newspapers, it’s diffi - cult to say what kind of impact they’ll have. You spend money to purchase the ad upfront, but you don’t know what the return is; you don’t know how many people will come to your store as a result of that one advertisement.” Finally, group-buying websites offer companies an opportunity to try out fresh products or test the waters of a new market. Even large international compa- nies with their own marketing depart - ments may struggle to understand how a product may sell differently in Taiwan as compared with their home country. “Taiwan is not a big country, but it’s a very unique place to do business,” says Kuo. “Some companies come to Taiwan thinking it’s very similar to China or Hong Kong, but Taiwan is different. Customer behavior and the indus- tries themselves are all very dif - ferent. So international companies can work with us to test products on the market and receive feedback very quickly.”

companies that were actually put out of business by the success of their group- buying deal.

Left, a Red Onion steak, and below, a selection of breads at Toscana.

photo: Aimee Won G
photo: Aimee Won G

NT$50,000, but here I only need to spend NT$10,000 and 2,000 people will come try my food. Who wouldn’t take that trade- off? If you think of it in terms of trying to turn a profit from the offer itself, that’s a problem. Then you start thinking about trying to lower the quality of your product.” Though other forms of adver- tising could be equally or even

photo: t osc A n A

january 2012 • taiwan business topics