A deep understanding of Groupon's new group buying

Industry background

Recently, the US website Groupon (groupon.com) became a hot topic in the domestic e-commerce industry, Groupon's valuation in the capital market exceeded the 1 billion dollar mark in 1.5, To $1.35 billion trillion, which followed a 1 billion dollar valuation of Twitter and Facebook, which took 3 years and 2 years, and then sparked a global imitation boom.

Among these imitators are the buywithme of America, the daily Deal of Germany, the snippa of Britain, etc. And in the country since the first similar site launched in March 2010 to now, two months time the imitators have reached three hundred or four hundred, and in the growing, which appeared earlier, such as the United States Group Network (meituan.com), handle network (lashou.com), F Regiment (Ftuan.com).

What is the prospect of this new type of group buying that has caused so many people's attention? What is the challenge? Is it possible to change the pattern of e-commerce? To this billion power network through more than 10 group buying websites and several investment agencies in-depth interviews, second-hand data analysis and other means of this model in-depth analysis and interpretation.

Billion States analysis

In this paper, we will mainly use the five-force model, SWOT and other competitive analysis tools for Groupon as the representative of the new group buying business model to interpret. The following is first introduced from the most typical representative of Groupon.com's basic situation.

Groupon, a US-sourced site, was founded in November 2008, and it took only 7 months to make a profit from its inception, ending in May this year with a registered user of 5 million, 300 employees, and a total of 2.9 million items sold through the site.

Groupon's business model is simple, it pushes only one discount per day for each area, one per person per day, and the discount must be a service type, with a regional service. Groupon's offline sales team is far beyond the online team. Groupon takes a full online fee and charges 30%-50% Commission on its suppliers, with a profit rate of around 30% per cent, with reports of $100 million in 2009 and a possible 2010 income of $350 million.

The following is a more detailed analysis of the business model of the new group buying website, which is represented by Groupon.

A, Groupon related group purchase website business model detailed

The following is a general presentation of a business model to illustrate the business logic of Groupon's related group buying website. It describes Groupon's related group buying platform: 1 What products are offered, 2 who provides products, 3 How to provide products, 4 cost structure, and 5 profit model.

As shown in the following illustration:

It should be noted that for the sake of simplicity, in the above figure only the consumer as the target customers, and the business as a partner to treat. In fact, the business can also be equated as a service target customers, so this map can be extended into two basic symmetrical charts.

1, products and services is what

In a narrow sense, Groupon-related group buying sites provide products and services targeted at end consumers. Its value is to provide consumers with cost-effective products and services shopping guide services.

In the broadest sense, its clients also include businesses. For the merchant, its value mainly manifests in two aspects, on the one hand, this kind of group buying site itself play a role in sales channels, in some cases, the merchant can directly through the sale of goods or services to profit (at this point, although the price of goods or services offered by businesses is very low, but because of the large sales, can still profit) On the other hand, such group purchase site itself is a huge advertising value of the media platform, the business through this activity can get full exposure.

Comments: From the above elaboration is not difficult to see, this new group buying mode for consumers and business value is worth affirming, consumers and businesses can benefit, its value is unquestionable, especially for the value of consumers.

2, the target customers are who

The above mentioned website's target customer mainly has two kinds, one kind is the consumer, one kind is the merchant. In marketing channels, generally speaking, the majority of group buying sites are using direct marketing model, there are a small number of web sites to expand this part of the job outsourcing to have local resources outsourcing team.

2.1 Types of consumers and ways to expand

The site's consumers are mostly used to online shopping, have a curiosity mentality of young people, and easy to be attracted by discounts.

In the area of attracting consumers, in addition to the site itself, the site also uses EDM, micro-blog, SNS and other ways to maintain contact with users. Because this kind of website provides the product and the service generally to have the high price-performance ratio, for example Groupon's discount proportion is different in 40%-90%, therefore each promotion activity's product lets the customer obtain the biggest benefit. Because of its ningquewulan, the choice of appropriate products strictly, so it is easy for users to spontaneously through QQ, MSN and other communication. So in fact, in attracting consumers, the two communication between users is the core focus.

2.2 Types of business and ways to expand

Web Service merchants generally have the following characteristics:

1 The marginal cost of products provided is lower, when the purchase of the user reached a certain amount, businesses tend not to lose money by offering a lower discount; 2 products are often mainly service-oriented, the sale of services to eliminate the physical goods may bring the logistics, storage and other costs, more often by the site to the merchants to provide subscribers list; 3 Consumers generate two of consumption, for some businesses, the provision of the purchase service itself may be a loss, its hope in the consumer two consumer behavior; 4 the product unit price is generally not high. Of course, the products offered by such group buying website do not necessarily need to meet all the above points.

and pulling consumers completely different, for business expansion, it is a virtually non-Internet expansion way, mainly through one-on-one offline communication methods to achieve. And because businesses and businesses are either there is a competitive relationship, or lack of communication, so even if group buying can bring great benefits to businesses, businesses are also difficult to produce two of times, this point and consumers between the two communication has a diametrically different.

Comments: From the target customer base, at the consumer end, because most users are sensitive to discounts, so the category of customers generally belong to low-end customers, the quality is not too high. At the end of the business, it can be applied to the products and services are not many, relatively belong to a narrow market, then this determines its market space is relatively limited.

3. How to produce

3.1 Website Resources allocation

Such group purchase site team composition can generally be divided into two parts, is the online team and offline team. Online team responsible for site development and day-to-day operation and maintenance, offline team responsible for the development of offline businesses. For group buying activities in a number of cities to buy the site, under normal circumstances, online team can be shared.

Typical case: The typical representative of the United States Group to buy a network for example, of the 20-person team in Beijing, 1/3 are responsible for web development, solving technical problems such as payments, and 1/3 of people running around Beijing looking for businesses, and the remaining 1/3 are investigating, editing and collecting data.

Comment: This is an industry that relies on offline resources much higher than online resources, so in a sense, this model is not a very Internet model, it needs a large number of "Sweep Street" team.

3.2 External partners

Groupon-related group purchase site can run smoothly, but also need some external partners to support. In addition to the cooperation of the business (of course, it can also be regarded as a customer), the main use of such as Alipay, such as payment tools support.

Comment: From the "product production" This latitude, this is a small dependence on external resources of the industry, such as the payment tool for example, because it does not have exclusive, everyone can easily obtain, and extremely stable (for example, not because of the sale of fakes and other reasons to seize the account), So it's hard to have a gap between other competitors because of who gets a better external partner.

4. Cost structure

The main cost of such group purchase site is divided into two parts of human cost and marketing cost, other small costs including but not limited to the site hosting costs. Among the human costs, mainly is the personnel salary, but the marketing cost, mainly is some public relations expense (for example weak text), topic hype (for example, hiring Word-of-mouth marketing hype their own website), SEM (for example, for example, in the case of Groupon, in some cities do a small number of AdWord keyword, similar to deal of The day,daily deals keyword) and so on.

Comments: Obviously, the main cost of the site is under the line "Sweep Street" team building.

5. Profit model

This kind of website's profit model is simpler, mainly collects the transaction Commission, in the case of Groupon, it collects the Commission proportion to the supplier is 30% 50%, but the domestic related group buying website collects the commission proportion to be far below this number. In addition, some domestic websites also charge a certain amount of advertising fees, that is, as long as the products on the site, no matter how much you sell a certain amount of advertising fees charged.

Comment: Trading Commission is the clearest form of profit.

Second, Groupon related Group Purchase website competition Analysis

The following separately with the Porter Five Force model and SWOT analysis tools for Groupon related Group purchase site analysis, the results of the analysis is shown in the following image:

1. Existing competitors

The study found that the current domestic competitors are numerous, such as the United States network, handle Nets, F group, and so on, the competition is extremely fierce. The existing group buying website mainly has the following two kinds:

The first category for the complete imitation of Groupon, which is temporarily in the leading position, such as the United States, Group F, handle nets, and so on, the current team size is mostly around 30 people, such a site in the initial stage without any user and business resources. At present, the number of such sites is hundreds of to thousands of.

The second category is similar to love groups (tuan.aibang.com, attached to love help network), rice balls (tuan.fantong.com, attached to the net) and other dependent on the original powerful merchants and user resources of the site, generally in the form of a sub channel operation. Although this kind of website has the formidable merchant resources, but the order quantity is not stable at present. For example, love groups, the number of its per-period group buys only hundreds of people, as of June 1, more than 2 times of the group purchase only appeared (as of June 1, a total of 28 group Buy), and rice balls since the line, the largest number of group buy only 777 people, at least to 15 people.

Comments: The United States network, handle nets, etc. because of early entry, by the media a large number of reports, with a number of advantages leading to the supremacy of other competitors, and love help group, rice balls, etc., although there is a strong resource support, but temporarily has not shown its due strength.

2. Consumer Bargaining Power

Single group buying sites are not sticky to consumers, the transfer cost of consumers is very low, consumers are generally what place to buy, if the purchase site to provide a product price is not strong enough, it will be quickly discarded, on the contrary, if cost-effective, users can often buy multiple items on the same platform.

Comments: For consumers, cost-effective is the most critical, sufficient, continuous cost-effective to enable consumers to create stickiness.

3. Supplier Bargaining Power

Similar to the situation of consumers, the relevant group purchase site for the supplier (offline business) control is not strong, the same people who provide the best solution, then it chooses who provides the service.

But for businesses, even if the group purchase site provides a good enough service, businesses are very difficult in the short term and many times with the group to continue to cooperate, because can not be repeated in a short time to the same service to consumers, so, this will lead to a lower utilization of the merchant resources.

Comments: Simple group buying site for the merchant's bargaining power is not strong, for the use of business resources is not high.

4. Threats from alternatives

Groupon as the representative of the site to serve the market is more special, more suitable for lower prices, and lower marginal cost of service products (see section 2.2). And this corresponds to the fence net, Qi Jia Net and other traditional group purchase website commodity One as the following characteristics: 1 The single average amount is higher, customers have the incentive to participate in group buying, 2 margin is higher, only price space and profit space for group buying organizations and consumers benefit, 3 pure service or high service content of non-standard products, Customers do not know how to choose, and need a third party to provide protection; 4 The brand concentration is low, the seller is not strong buyer's market. Again, not necessarily 4 points.

From the above analysis can be seen from the market positioning, the traditional group purchase and Groupon for the representative of the new Group purchase site is not exactly coincident, so the two competition is not in fact fierce, there is a big difference.

Comment on: Because the product type of group buying is different, so the threat from the traditional group buying website is not big.

5. Threats to new entrants

It is expected that potential new entrants include, but are not limited to, the following categories: The first category is Groupon's pure imitators; the second category is the Web site that owns the offline business resources, such as the public comment network, 58 city, and the third category is Taobao and other traditional online retail enterprises; The fourth category is such as happy some SNS community In the long run, such as innovative factories and other manufacturers have access to mobile phone terminal resources are also possible to enter the market.

Among these categories of competitors, the biggest threat is from similar to the public comment network, which has a strong online or offline resources of enterprises. In the competition, this kind of website has at least two advantages over the pure group purchase website such as the American group net: 1 line offline resources can be reused, such as for the public comment network, its original online and offline resources and this group purchase mode of the user group is very consistent, this new group can produce a good synergy with its original business; 2 profit pressure is small, This new group purchase for similar to the public comment on the network of enterprises, can not consider it as a direct profit model, but as a platform to enhance the stickiness of marketing tools.

Comments: The biggest variable is the public comment network, such as the competition has a wealth of resources, they are choosing to make quick money through group buying, or to subsidize the business to attract popularity.

Through the above analysis, here is a simple summary of Groupon related sites, advantages, disadvantages, and the existence of opportunities, threats, as shown in the following figure:

Billion states found

In view of the above analysis, finally once again to Groupon as a representative of the new group buying model to do a simple summary:

1, the value of consumers and businesses should be affirmed, consumers and businesses can benefit from it, its value is unquestionable.

2, from the target market, in the consumer side, because most of the discount sensitive customers, so the overall view belongs to the low-end customers, and at this end of the business, it can apply to the products and services are not many, so relatively belong to a narrow market.

3, the offline resource dependence is much higher than the online resource dependence, so in a sense, this model is actually a relatively traditional business, the need for a strong line of resources to support the development team.

4, a strong regional, each expansion of a city needs to be in-depth local to obtain service provider resources.

5, simple group buying site is not sticky, and the utilization of the resources of the merchant is low.

6, and the fence, Qi home and other traditional group purchase sites have a clear market, there is no obvious competition between the two.

7, in the long run, to the public comment network for the representative of the company has a certain line and offline resources relative to a single model of the relevant group buying site in this area will have a certain competitive advantage.

Billion state recommendations

Based on the above viewpoints, the billion state Power Research Center recommends:

1, for all related group purchase sites, in the expansion process, should not be too rapid expansion, the development of a city should occupy a city, the inability to operate the city can temporarily give up, or to find a strong local resources partners to operate together.

For the public comments network, such as the representative of the competitors with offline resources, it is not appropriate to direct profit through this model, a better strategy is to subsidize the business, so that consumers and businesses to maximize the benefits, so as to enhance the stickiness of the platform, and ultimately through other ways to profit.

Article source: Billion Power network, author: Yudeguang (Billion Bang Power network chief analyst).