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Fizzling out? Group buying sites in the UAE

Fizzling out? Group buying sites in the UAE

Groupon.com’s accounting troubles and rising rate of customer refunds stands an ominous forecast to the imminent fate on daily deal websites in the UAE thinks Eva Fernandes

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April 1, 2012 1:39 by



Two years ago a friend of Kipp quit her job to start ‘something’ of her own. As she brainstormed for possible business ideas, a daily deals group buying website was among the first idea to pop into her mind. And it is easy to understand why: two years ago, with Gonabit and Cobone setting up shop in the Emirates, group buying was all the rage. ‘Coupons’ were in vogue again, and many in the region were quick to jump on the bandwagon. From Moosavings, YallaBanana and BBM Baby, Nailthedeal, Cobonza, Cobonatti, Mox Deals and Makhsoom, Kipp has long since maintained that the daily deal websites scene is over-serviced.

We were, of course, rather interested to find out about plans to launch a group buying website for properties. Late last year, we wrote of our interest in the invitation-only daily deals site called Grosper.com that aimed to offer ‘serious’ deals on accommodation and cars;  and yet barely three months into the new year it would seems Grosper.com might be the first daily deal website to close shop in the UAE. Emirates 24|7, in this article: “Where have the deals from Grosper.com gone?” points out there have been no tweets, Facebook update or emails of discounted offers from Grosper.com since February 2.

News of Grosper.com sudden disappearance comes at a time when group buying giant and darling of the internet Groupon.com comes under fire yet again for its controversial financial statements. This weekend, the daily deal website was forced to revise its Q4 results on account of more customers asking for a refund. After the revision, Groupon.com is noting a loss of $65 million (not $43 million as it previously reported) on sales of $507 million.

Significant as the revision maybe, this isn’t the first time Groupon.com has reviewed financial statements. Last November the website reported nearly double its actual sales when it failed to account for the amount it had to hand back to merchants after purchase of the coupons. At the time, Groupon reported revenue of $1.5 billion, for the first half of 2011-a number that nearly halved to $668 million.  Similarly, the website revised its sales for 2010 from an impressive $713 million to $313 million.

Here in the UAE, Groupon.ae was not only late to the party but it has also been plagued with much publicized problems. In December, The National reported the website had received more than 100 messages complaining about its service. Groupon, itself, acknowledged and apologized for its shortcomings in a Facebook message to its customers: ” We have had overwhelming response to this and unexpectedly had very big volumes to deal with without being fully prepared. In some cases we have missed the delivery deadlines. As a result of this, our phone lines and email accounts have been flooded, limiting our ability to answer all the inquiries at the level we would like to maintain.”

Groupon.com’s accounting troubles and rising rate of customer refunds stands an ominous testament to the fate on daily deal websites in the UAE—we have long since felt that GoNabit has lost luster since its acquisition by Living Social. We hardly hear any buzz around other websites like moosavings and bananas in a hurry or whatever it is called…all this makes us wonder if the imminent POP of the group buying bubble here in the Emirates is nearing?



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1 Comment

  1. Seamus Flanagan on April 2, 2012 11:17 am

    Dear Ms Fernandes,

    I agree with some but not all of the statements you present on the UAE’s group buying phenomenon. And thank you for making my team laugh.

    As the GM of ‘bananas in a hurry’ – or YallaBanana.com as we prefer to be known, I can confirm that based on size, the market is highly congested, competitive and as you rightly point out, ‘over served’.

    Anyone who studies this infant industry can turn to the US model (where there are more than 500 daily deal sites) for a hint of thing’s to come. Scale and the cost of customer acquisition have been the decisive factors which has led many sites to fold. They just can’t compete with the bottomless pockets of the big 3.

    But there’s another side too, one which is usually overlooked by the media. To compete, many of these sites are increasingly re-inventing the model and evolving in entirely new directions.

    And there is no reason to believe that the UAE or wider region will be any different. A consolidation is coming definitely. But an ‘ominous fate’ I think is stretching reality for the sake of a good tagline.

    Definitely, many new entrants believe deal sites are a license to print money. They are not. Group buying like any business requires planning, foresight, a point of difference, and as more are discovering, exceptional customer service, both merchant and consumer.

    Two thing’s are certain. Everybody loves a great discount and group buying, despite all of the real or perceived negatives have changed e-commerce in the Middle East forever.

    The real question you should be asking is what next for the deal buying pioneers in the Middle East rather than writing off an entire industry for which there is a huge appetite.

    As part of Turret Media, a well established regional media group, YallaBanana can draw on a wide pool of in-house talent, business expertise and media channels to offer merchants and consumers a very different experience. One which we are refining and developing constantly.

    And based on his reception at Taste of Dubai (another Turret brand) where he had his photograph taken with over 3,000 fans, our mascot ‘YB” ( a 7 foot incarnation of our logo) tells us there’s life yet in this deal buying business.

    And who am I to argue with a 7 foot walking talking banana!

    With kindest regards,

    Seamus Flanagan
    General Manager Turret Digital
    YallaBanana

     

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