Group buying in South Africa – all hype?

The online group buying industry (often called social buying, collective buying or even social commerce) has literally boomed in South Africa, as it has all over the world.

Rather interesting, especially when one looks at the fact that other countries have up to six times the internet penetration than South Africa has, and have far more people with a great deal more buying power. So why has it grown so fast — is it hype?

Thus far, Groupon have rushed in and bought a lucky Twangoo, Wicount and Dealio are running radio adverts that must have cost a good package, CollectiveCow was bought, CitySlicker and CityMob clearly have deep pockets (or deep funding?) and UbuntuDeal was acquired by online marketplace, bidorbuy. Avusa has also launched its own group-buying attempt: Zappon.

LivingSocial, the second largest group buying site in the world, is now a registered trademark in South Africa. Sites are popping up all over, and a quick ‘whois’ search on a few obvious domains shows that Media24, Amazing Vouchers and a few others are planning to join the fray. And with group buying WordPress themes available for as little as US$199, it is quite easy to see why anyone thinks they can make money.

So, excuse the pun, but what’s the deal? What is the real value and what is actually going on? Are we looking at an industry based on hype, as GrouponSA co-CEO Daniel Guasco has mentioned more than once in his presentations, or are we just becoming part of a new world driven by social commerce?

The truth so far, in South Africa at least, is that we’re heading for a shake-down. Some sites have actually closed already, while others advertise and never open. Only the (few) profitable and of course funded players will stay; the rest will exit. Anyone still wanting to enter the industry is simply, to put it plainly, too late.

Therefore, what is important for now, is to do the checks and balances necessary with any marketing service provider. Would you advertise in a newspaper that you think will be out of business in two months? Would you buy a voucher from a site that closes down and can no longer refund you? Similarly, marketing departments, PR professionals, businesses and customers need to sign up with group buying sites that not only have a solid team and good backing, but that also provide a top quality online campaign which benefits the business offering the deal. No point selling 1 000 vouchers if the business cannot cope with that demand.

As usual, when a downturn occurs overseas in any industry, it eventually filters through to South Africa. And the end result? Those companies built on offering real value to satisfied clients always survive and keep growing.