Thanks to Groupon’s easy-to-copy business model, Avusa now has a cheerful way to extract more money from their newspaper readers. Say hello to Zappon, South Africa’s latest collective-buying site, brought to you by Avusa. By SIPHO HLONGWANE.
The collective buying idea, first pioneered by Groupon in the US, has taken South Africa by storm, not in the least because Groupon itself bought one of its local competitors. As we explained when local group-buying start-up Twangoo was swallowed by Groupon in January, the core business model of collective buying is ridiculously and brilliantly simple. Discounts from merchants and retailers within a location are offered to email subscribers, but only kick into place once a certain number of buyers accept the deal. Hence “collective buying” or “group buying”. The collective buyer takes a cut from the deal and the retailer gets the people flocking in.
This simplistic model has seen Groupon’s recent projected market valuation at $6.4 billion, and the Chicago-based start-up is looking to make $1 billion in sales (figures for 2010 were $500 million) -faster than any other company, ever. It also launched an avalanche of competitors around the world. There are already more than 50 Groupon copycats in South Africa, according to some estimates.
Local media giant Avusa has now joined the field with the launch of Zappon. In a statement, Avusa said that “marrying advertising and retail, the relatively new group buying concept makes strategic sense for Avusa Media with the company’s brands already targeting and advertising to an established and loyal audience. Adding Zappon.co.za to this media giant will simply further enhance the overall consumer experience.”
But what is a media company doing in what is effectively the sales business? The clue lies in how Zappon intends to market itself. Avusa will use the Sunday Times, The Times and Sowetan, as well as TimesLIVE and SowetanLIVE to market Zappon’s deals. This is an enormous, ready made audience.
“From an advertising perspective, we definitely have a competitive advantage,” said Elan Lohmann, general manager of Avusa Media Live in a statement. “Not only do our existing advertisers and suppliers inherently trust our brands, but we are currently offering clients massive media exposure to roughly 2 million readers a day via print, direct mail, website and social media channels – all at no charge. Which other group-buying platform can offer the credibility and trust that brands such as Sunday Times can provide, at no cost?”
Another way to look at this is that Avusa has found a way to extract more from their readers. “Yes, we’ve got a big reach and we want to expose our readers to these deals,” Lohmann said.
Lohmann believes that comparing Zappon to Groupon is pointless. “I don’t think it’s a one-horse race,” he said. “We think there’s space in the market for more than one competitor.”
Zappon’s launch has not been without teething problems, as was demonstrated by the arrival of what were clearly meant to be dummy test emails in my inbox. On Wednesday, Zappon also issued a statement on Facebook, saying “we regret to announce some unexpected technical glitches on the site.
“Unfortunately our server was unable to handle the load, which resulted in a couple of teething problems this morning.”
In certain areas, Zappon may also fall short of the requirements of the Consumer Protection Act, which kicks in on 1 April. In his web.tech.law blog, legal expert Paul Jacobson said, “One potential challenge could arise where the coupon site uses the term ‘voucher’ instead of ‘coupon’. I noticed a few instances of this on the Zappon site, both on the offer page and in the terms and conditions.
“The reason why this is potentially problematic is that the Consumer Protection Act distinguishes between coupons and vouchers,” Jacobson said. “A voucher, as far as the Consumer Protection Act is concerned, is something more akin to store vouchers you may buy from a bookstore or shopping mall. Vouchers are alternate forms of tender, not necessarily discounted promotional offers such as the ones the coupon sites promote.
“One of the interesting features of a voucher is that the CPA states that a voucher only expires either when its full value is redeemed or after three years. That expiration term doesn’t work well in the context of coupons and, in the interests of maintaining a clear distinction between vouchers and coupons, Zappon should change its references to vouchers to coupons (rather). Unless its intention is to issue vouchers, of course,” said Jacobson.
Jacobson later confirmed that Zappon does in fact make a clear distinction between coupons and vouchers. He also said on his blog Zappon may not have fully complied with its obligations in the terms and conditions area, especially as the site doesn’t seem to elaborate to the coupon holder how the transaction was supposed to take place once they redeemed the coupon with the retailer.
Given that jointly the five publications Avusa intends to use to market Zappon deals have an enormous readership base, it’s hard to see how they’ll fail to make money out of this. Especially since it mostly involves offering readers discounts in what is normally considered luxury goods and services. Hell, they can probably even manage to crowd Groupon SA out of the market. Will the people bite, though? Apparently, yes. They overloaded Zappon’s servers in its second day of business. DM
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