Dishing out Asia's deals

newsmakers SINGAPORE--Sourcing out quality deals and being upfront about terms and conditions are StreetDeal.sg's top priorities, said co-founders Gregory Costamagna and Olivier Michel. With these in place, they aim to grow the company into one of Asia's top three online group-buying sites in two years.

Since its launch in October 2010, the site has been growing its presence locally. The founders share that at the start of June, StreetDeal.sg boasted 22,000 unique visitors daily; since its inception, it has also sold more than 38,000 vouchers, helping customers save over S$4.9 million (US$4 million) in total.

Hailing from Marseilles, France, both have since relocated to Singapore and call it home. Michel looks after the sales and finance side of business while Costamagna takes care of marketing, customer service and IT.

However, the two expatriates recognize they cannot rest on their laurels, as competition in the still-nascent industry is heating up. Michel said there are now about 42 such sites in the market and more are expected to follow with low barriers-to-entry. To stay ahead of the competition, he said its focus on customers and merchants will be key.

"Putting up a Web site with deals is very easy for almost anyone. Understanding the business, how it works, customer and merchant acquisition--these are a bit more difficult. In terms of differentiation, clearly we'll continue to focus on customers and merchants," he added.

Speaking to ZDNet Asia in a recent interview, the two founders also revealed why they decided to start a group voucher site and their plans for overseas expansion.

Q: You both previously worked in the travel insurance industry. What made you decide to go into the online business?
Costamagna: We've always wanted to create our own business. We studied different types of online business opportunities, including price comparison sites which are very strong in Europe and the United States.

Around last July, we decided that the group-buying model was interesting for two reasons. First, it was a very fast-paced business, and second, we thought we could bring an improvement to the market which was fairly new at the time. We created the Web site, launched it in October 2010, and have not looked back since.

Michel: In terms of implementation, the group-buying business is much easier. The price comparison model is based on advertising revenue, so you need to get traffic and then sell advertisements. It's more complex. You need to build your audience to have a sizeable Web traffic before you can even think of selling ads. Group buying, on the other hand, is much easier to start up and the revenue pace is much faster, both in terms of generating income and the time between starting your business and getting to critical size. You start making money with the first voucher you sell.

StreetDeal.sg does not require a minimum quota for coupon sales to activate a deal. Wouldn't this disincentivize merchants who want to increase customer traffic?
Costamagna: We advertise substantially toward retailers' target segments to make sure we drive enough traffic to them. The merchant is never at loss because advertising with StreetDeal is free for them anyway, so whether they attract one or one thousand customers, the cost for them is the same.

It's also very important to look into retailers' maximum capacity, which we've done from the beginning. If we send too many customers to one merchant, who cannot handle the traffic, this will affect them badly. It will also have a negative impact on the customers' perception of the overall experience with StreetDeal and the merchant in question. So we want to avoid that as much as possible.

To do so, we ask the merchant a lot of questions such as their current availability, the time duration of the offer and the number of outlets they have.

Is it tougher to make money now that there is much more competition in the market?
Costamagna: When we came into the market, the market was a little less mature than it is today. The other sites were not finding the right types of deals for customers or are publishing deals with hidden conditions. Seeing this, we definitely eyed an opportunity to do things better with two specific groups--the customer and the merchant.

For example, do you want a restaurant voucher that you can only use for the whole table? No, you want to be able to use one voucher per person. Basically we wanted to be as transparent as possible, and also show as much of the conditions as possible. So, when the customer buys the deal they know what they're getting and when he goes to the merchant, he is not disappointed. We really try to focus on the quality of the deal and transparency with our customers.

On the other end, we do a lot to improve merchant relationships. It's much more than, "We strike a deal, we sell a lot of coupons, and goodbye." It's not one-off. We try to build a long-term relationship with retailers by sharing with them what the customers want because they might have a different idea.

Also, we don't just want to bring volume to the merchants. I could go find all sorts of customers and send them great discounts but the merchant won't be happy, because the customer might come once for the discount and never return. What we try to do with the merchant is ask what type of customer profiles they want, and we help find them.

At the end of the day, our interest is for repeat business for our merchants, which in turn helps us build long-term relationships with these retailers.

Michel: The understanding we have of the business is clear: from a consumer perspective, what they are looking for is a good deal, regardless of who is providing it. They're not looking for a good deal from Groupon or other specific platforms. It's a very local business.

A good example would be South Korea where Groupon is present but nowhere as big as the local players. This is because Groupon doesn't have the local knowledge and tried to duplicate its U.S. model without understanding consumers' expectations. So there's clearly an opportunity for local players to have a fair fight with global ones such as Groupon.

You mentioned deals with hidden conditions. How big of a problem is this?
Michel: We are very concerned about this, actually. A lot of players tend to do whatever it takes to send out as many vouchers as possible, regardless of whether they can fulfill their end of the deal. At the end of the day, you have an article in The Straits Times with complaints and negative buzz around group-buying sites, which impacts the whole industry. So transparency is a key criterion for us.

You will see on our Web site that our terms and conditions are clearly longer than any of our competitors. It's not aesthetics. This has an impact on sales. We [probably] could sell much more if our terms and conditions were smaller, but we want to avoid customer frustration.

So you've received no complaints so far?
Michel: You can't avoid complaints, but we never had 1,000 complaints [posted] on Facebook for one deal. That happened with our competitors.

Costamagna: If you want a number, I think we receive maybe one strong complaint once every three or four weeks, which is few. Then you have people who are unhappy because they didn't receive the voucher or because they can't book an appointment at a time they want. But we always say, "Let's find you a solution." If it's not possible, we refund the customer. We always try to have a problem-solving approach to any customer relationship.

Michel: Our approach is never "This was written in the terms and conditions. You didn't see that, so too bad for you." In fact, one of the KPIs (key performance indicators) for our customer support staff is how they solve these problems. Also, our terms and conditions are crystal clear so people know what they're going to get.

Do you think group buying in Singapore is a sustainable business despite the competition?
Michel: Very sustainable. Do you think Singaporeans will stop queuing for petrol discounts? No, never. Singaporeans will always be interested in good quality bargains. As long as you deliver good service, there will be room for this business.

Last we counted weeks ago, the market has about 42 Web sites. If your question is, "Is there room for 42 Web sites?" Maybe not. What we've seen in the U.S. or Europe is there's clearly room for four or five key players in the market. We do monitor the newcomers and what the competition is doing. Everybody knows the barrier-for-entry for this business is low.

However, scalability is another issue in that how to make it work, work well and get bigger in the long term. Putting up a Web site with deals is very easy for almost anyone. Understanding the business, how it works, customer and merchant acquisition, is a bit more different. That's the main challenge of this business. In terms of differentiation, we'll continue to focus on customers and merchants. We also have a couple of new innovations in the pipeline for these groups.

Innovations such as…?
Costamagna: We're currently working on having segmented deals: giving deals people want and having more deals per day that are targeted to the individual. Ideally, the ultimate goal would be to offer as many relevant new deals to customers, by qualifying our customer base. What we're trying to do is ask our customers what do they like from our deal categories such as food and beverage, health and beauty, retail and services, travel, and events. Once we know that this particular customer does not like travel deals when he goes to the Web site or receives the newsletter, for example, he will see deals that are filtered according to his likes, which cuts down on clutter.

There will also be some IT solutions and comprehensive mobile applications. The objective of these innovations is to reinforce our relationships with our customers and merchants.

Congratulations on recently opening an office in Kuala Lumpur. Question is why Malaysia and why now?
Michel: We decided to expand because it's the right moment for us. We think we understand the business fully now, including things like achieving ROI (return on investment), the communication channels that work, etc. We have reached a stage in our growth in Singapore where we're comfortable with the business understanding.

Why Malaysia? We worked quite a lot in Malaysia in our previous employment, so we know the market quite well. In terms of Internet and e-commerce penetration and the number of Facebook users, Malaysia is clearly a potential market. Our objective is to be in the top three group-buying Web sites in Asia, targeting eight to 10 markets within two years.

Costamagna: Of course you have the big markets like China, India. We don't believe those are markets we can "attack" within the first year of our company because those markets are very competitive. So our focus for now is Southeast Asia and we launched in Malaysia almost a month ago. Thailand is next, within the next three months.

As part of its Asian expansion, Groupon acquired local startup Beeconomic, which is now Groupon Singapore. Is acquisition something you are looking into?
Costamagna: We have a long-term strategy to grow. Acquisitions are just a way to enter markets, among others. For example in Malaysia, we decided not to acquire anybody and go in on our own because we believe it made sense in terms of the amount of investment needed, the fast-paced market, etc. We study the markets on a case-by-case basis, whether it makes more sense to buy or not.

Michel: At the moment, we're looking at getting more capital to finance this growth. Partnership with global or local companies is definitely something that can bring synergies and speed to expand internationally. We are not closed to partnerships as long as they make business sense for both parties.

As owners of a daily deal site, would you consider yourselves to be bargain-hunters?
Michel: I'm not that crazy about bargains, but I do look into the quality of the service that I get. I would not hunt around Singapore to get an S$5 (US$4.06) burger, but I would go to great lengths to get the best burger.

Costamagna: I have a somewhat similar approach to discounts. Discounts for the sake of discounts is not something I'm interested in, but for quality service or products, definitely. Why pay the full price when you have an incentive for less? That's what we're doing: to push for the quality that we, and others, are interested in.

What would you say to those who might be skeptical as to how two French expatriates would know the discounts Singaporeans look out for?
Michel: After four years (points to Costamagna), and eight years in Singapore, we kind of know.

Costamagna: We have made many Singaporean friends over time, so we ask them what discounts would interest them. But to get a pulse of the local market in the most systematic manner, we now organize monthly luncheons with customers and merchants to gather feedback. The comments from these meetups are most valuable.