Hong Kong’s group-buying market, despite booming rapidly when it first started,has found lackluster receptivity from the city to this particular type of e-commerce,compared with other developed markets.
Danny Yeung, chief executive officer of an online deals provider Groupon Hong Kong, said perhaps one of the main drawbacks of this type of e-commerce is that the city’s consumers still have to print out the on-line purchase voucher on paper for redemption at a store or to enjoy a discount for a meal at a restaurant. This probably explains it.
On the mainland, online-coupon providers will send a string of numbers to the buyers through short messaging system (SMS) via their mobile phones. Then consumers only need to display the codes at an outlet or restaurant and the dealers will verify it through a computer to conclude the transaction or to provide a discounted meal.
“It may surprise you, but many of the Groupon dealers in Hong Kong do not even have computers,” Yeung told China Daily during an interview, adding that city’s population density and the convenient shopping environment hindered merchants as well as consumers’ deployment via e-commerce.
Technically it is simple for Groupon to provide digital codes to the consumers. However, some merchants in the city still insist on receiving a paper voucher as they are unable to conduct real-time verification. On the other hand, Groupon also insists that all the merchants print out vouchers for all purchases made on paper too compounding the matter.
Hong Kong people are known for being less keen to shop online. According to a research conduct by the Boston Consulting Group in 2011, despite the city’s broadband speed being one of the fastest in the world, people’s Internet expenditure, which includes e-commerce, is well below average for developed countries.
Compared with South Korea and Japan where almost 96 percent and 97 percent of the population are engaged in online transactions, Hong Kong’s 60-odd percent Internet buyers are left far behind, Yeung said, adding that the local people’s e-commerce awareness also lagged consumers on the mainland.
In March, a report released by an independent research institute China E-Commerce Research Center indicated that a total of 203 million people participated in online shopping on the mainland last year, up 28.5 percent from the previous year. Total online retail sales reached 801 billion yuan last year, a sharp increase of 55.8 percent from 514 billion yuan ($81.7 billion) a year earlier, the report said.
Carrie Yu, PwC’s retail and consumer leader for China and Asia Pacific, said online shopping in the city is not as active as on the mainland partly due to the fact that many households have domestic helpers to do the grocery shopping.
“Moreover, store shopping and browsing is considered a social pass-time. However, we see online retail is becoming increasingly popular. This is particularly relevant for apparel, health and beauty products,” said Yu.
Despite the Boston Consulting Group’s study projecting a lukewarm 7 percent annual growth of Hong Kong’s Internet economy, consisting of online shopping, e-commerce, and investments in the Internet, the CEO of Groupon Hong Kong, said the advantages of group-buying websites are obviously offering great deals for both the merchants and consumers, due to its unique operation mode.
The website offers online consumers various kinds of products through dining to daily necessaries to travels, with favorable amounts of discount. Meanwhile, merchants advertise their products on high-traffic websites, while still making a fortune. Groupon Hong Kong will share the profits gained in the transaction evenly with the merchants, according to Yeung.
Yeung, who defines the group-buying website more as a “marketing channel” rather than a “sales channel”, said Groupon offered more exposure at a lesser price compared with spending HK$700,000 for a 30 seconds commercial slot on TV or HK$40,000 for a spread in a local magazine.
However, Yeung refused to disclose the website’s traffic as well as the number of active members Groupon Hong Kong currently owns, citing its “global guidelines”. The Hong Kong subsidiary, formerly known as uBuyiBuy.com, was acquired by the global online coupon-market leader Groupon in 2011. Groupon claims to own over 33 million active customers as of Dec 31, 2011 in 48 countries and regions worldwide.
Data from the research provider Experian Hitwise shows that Groupon Hong Kong remains the market leader in the city by mid-March 2012 with 54 percent market share, compared with its 62 percent dominance in April 2011, signifying a fierce competition in the market. Some local news reports said the city’s consumer group-buying market is estimated to generate revenues of $60 to $70 million each year, with more than 80 players now offering daily deals in the market.
George Sun, PwC’s consulting associated director believes the overall business model of group-shopping still needs to be optimized as the current business model is basically a purchase of consumer base model, while the initial thinking was to use the model to develop a consumer base quickly to integrate off-line resources.
“From the consumer side, the group-shopping businesses are not able to develop customer loyalty and regular buying behavior. From the supplier side, the manufacturers are reluctant to sell a broad range of products through group-shopping companies. Therefore it is still very difficult to integrate the off-line resource,” Sun added.