Groupon has been on the receiving end of a barrage of customer complaints in the region, but executives of Groupon say the operating teething problems have been resolved. But many small local players in the market may have to merge to survive.
Sorting out Groupon's glitches
Many of us have picked up at least one voucher from a daily-deals website for a discounted holiday, a cheap meal or even a day lounging on a yacht.
The online vouchers industry almost sprang up overnight in the Emirates in 2010 and has grown dramatically since, with about 30 players now in the market.
But it has not all been plain sailing for the group buying sites, particularly the Middle East branch of Groupon, the global market leader that is listed on the Nasdaq in New York and announced revenue of US$1.35 billion (Dh4.95bn) in the first quarter of the year.
The rapid expansion of Groupon outside the United States caused growing pains for the company, and the Middle East was no exception, with customers repeatedly complaining about late deliveries of goods and other poor service.
In their trendy new office in Dubai, Alexander Kappes, the chief executive for Groupon Middle East, and Samer Choucair, the chief operating officer, explain why they hope such problems are now behind them.
What has been done to address the previous complaints of poor customer service at Groupon Middle East?
Mr Kappes: We took our customer-service people and moved them to an external office in order to get access to better technology, more phone lines, better training and so on. That's a step we took immediately.
And the problems with deliveries?
Mr Kappes The majority of the issues we had were regarding the delivery of products. What we did at that time was cancel business with all our international partners except for a couple of vendors that we trust 100 per cent and have proven very reliable. We halted business with international providers that we were sourcing our products from and refocused entirely on sourcing nationally. That's now our strategy.
Mr Choucair The issues we had previously were when we relied on international partners to bring the product themselves into the country. Now if we do source an international product, we make sure that it is brought in through a local company. We go to them and ask them to source something.
What is the advantage to that strategy?
Mr Choucair The supplier takes on some of the risk, we ensure the inventory is in the country, so don't take the risk of international shipping and customs, and it's again like sourcing it locally. It's a lot easier to control.
Has anything else been improved?
Mr Choucair We have all the information provided to our call centre now. Previously, we had some lack of information transfer. So in some cases even if they did answer the call, the call centre might not have been able to answer your question. Now they are able to.
What about email and social-media inquiries and complaints?
Mr Choucair We also have a big enough online team now to respond to emails within 24 hours, and we have set up an escalations team. Whatever they cannot handle at the call centre, or if an upset customer wants to speak to a supervisor manager, it gets escalated to a special team that has the authority to make decisions beyond just basic answers.
It sounds like you have finally begun to get on top of things.
Mr Kappes We are now taking 98 per cent of calls immediately. We get on average 800 to 900 calls a day. The majority of calls are inquiries. Our email backlog right now is at zero per cent. In May, we launched our Aramex partnership so all our logistics, all our deliveries, are handled by [that company]. Every customer can track their delivery.
Have these changes helped to improve market share?
Mr Kappes Over the course of this year, we are the biggest in the UAE. We have two business intelligence units that pull the data. The data we can check is [the amount of] revenue generated and vouchers sold. It does tend to fluctuate on a weekly basis, but over the year, we are the market leader in the UAE.
But Cobone, another group buying website, say they are also the market leader in the UAE? Whom should we believe?
Mr Choucair We are currently only in the UAE. Cobone's revenues on a regional level are higher than us. In the UAE, we are higher.
Mr Kappes We get a larger share of revenues [from deals]. We are beating Cobone a lot more in profitability than revenue.
You sound confident. How many vouchers do you sell on average each day?
Mr Kappes On an average day we sell about 1,500 vouchers. The first quarter was the strongest that we have had. We are just closing the second quarter now.
Are you expanding in the Middle East?
Mr Kappes We've started developing our expansion team, setting up and hiring people to drive [it] throughout the region. The first stop of expansion will be in the GCC countries.
Compared to other group buying websites, you pay your merchants when they return a voucher code to you. Would it not just be easier to pay out upfront to merchants like other websites?
Mr Choucair From an administration perspective yes, but does it make sense? Absolutely not. As a small business, a lot of these vouchers are valid for six months. I could be a hair salon and provide a crazy deal that could sell 3,000 vouchers and we are talking Dh300,000 in sales.
If [the merchant] gets that money upfront, he could go and set up another barber shop before even providing a service to Groupon clients.
Mr Kappes We are the only company to offer the service of refunds to our customers. If 20 per cent of customers say they weren't serviced properly and we give a refund, where are we going to get that money from if we have already paid out to merchants?
My inbox is nearly full in the morning with emails from group buying websites. Can so many survive in this market?
Mr Kappes It's consolidating a lot. If you look at market shares, Groupon, Cobone and LivingSocial make up about 98 per cent of the market. Whoever is left, and I think last time we checked there were 30 websites in total, those 27 hold about 2 per cent of the market. For them, it's going to be extremely difficult. Those small ones have a chance if they merge.
Mr Choucair It's not an easy business. You need a huge amount of capital. Although it's not an asset-intensive business, it is operating intensive. Our marketing costs are humongous. It seems like a simple model, but it is not easy to sustain.
Groupon has been criticised worldwide as failing to adapt and understand the new markets they have entered. Do you think Groupon's global presence is now a handicap?
Mr Choucair I was born and raised in Abu Dhabi.
Mr Kappes I also grew up in Abu Dhabi.
Mr Choucair We are not running the business from Germany, we are running it from Dubai. We are using locally hired talent. We are running it with people that have a background in the country and we are sourcing locally.
Mr Kappes And there a lot of reasons why our size is an advantage. We are the biggest spender on Google in the world. That makes things happen.
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