The UAE has saturated with around 30 daily deal or group-buying websites, offering the world for attractive discounts. But, the business model knows its flaws.
Group buying and daily deal websites are the online buying solution of 2012. Although online buying is yet to win over the bulk of the market, it seems that the daily deal is winning over the public and gradually transferring the market into a digital one.
The UAE market must be saturated with around 30 such businesses nowadays, and new initiatives are popping up with the day. However, the business model has its flaws. At the same time of the increasing popularity, customer complaints are trickling in. Bad services, false advertising, undelivered promises and manipulation of sales numbers are among the ailments that have plagued the business.
The idea of a group buying website is that a deal is on offer for a product, leisure activity, restaurant meal, or anything else you can think of -name it and you will find it. When the minimum amount of buyers is reached, the deal is on.
Common demeanor of all group-buying websites is the intermediate element. The website presenting the deal enlarges the reach for the vendor offering a discount, and at the same time creates a convenient platform for customers to find the best bargains in town. It is the lack of direct selling or buying activity that leaves room for error.
"Unfortunately, one of the major pitfalls of the business is false claims by certain companies, both group buying websites and the vendors, about the deals being offered," says Tareq Ellahi, co-founder of Nail the Deal.
One of the most obvious discrepancies is found in price. "It happens that the deal is offered for a certain price, promising a certain discount, while this price is higher than the actual price of the product, and the discount in reality is much lower," explains Sevak Boyadijan, founder of dealsNmeals.
It happened to Farida Bahr, managing-director of the French Connection, a Dubai-based restaurant. "I advertised an offer at my restaurant on one of these sites. When I saw the deal, I realized the information was not correct. The prices were inflated!"
Sevak tells how he heard from clients that not only the prices are sometimes bluffed, but also the number of buyers displayed on some sites. “These businesses might be prepared for 200 customers, while only 2 customers show up.”
Farida tells: "Once I informed about the number of buyers. I was told that the number displayed on the website was higher than the actual number, and that I would be informed of the real number of customers I could expect.”
Criticism is directed at the discount-offering companies too, especially those offering services. Often heard is that the customer with a voucher does not enjoy the same quality of services as the regular customer does.
"I was literally told that there was another section for customers with vouchers when I tried to contact the driving school I registered with," tells Kinana Homsi-Mardini, a Syrian resident of Dubai who purchased a 50% discount on driving lessons at a group-buying website. “I have yet to experience if it is true, but I was told by an inside source that customers with a voucher are less likely to pass!”
Another Dubai resident tells how she was told in a massage center that the she had to wait in the section for customers with a voucher, after which followed a treatment showcasing total lack of care.
"What we want our providers to understand is how they can benefit from advertising on a group-buying website," tells Sevak. "There is maybe an 80% out there hunting bargains, but the remaining 20% is looking for quality. The latter are potential long-term customers, if serviced properly. But, even the bargain hunter can prove beneficial; he will tell his friend about the 'good deal' he had for such a low price."
Sevak says he considers a good product or service a responsibility shared by his company as well as the provider. "When a customer is not satisfied, it harms our name as well as his.”
To guarantee a quality product or service, group-buying web representatives do mystery visits, quality control, product testing or verification of official documentation. "We have a very stringent company policy of vetting vendors whereby we not only visit their premises but we also try their services/products in many instances before finalizing a deal,” explains Tareq.
Sharing a similar view is Alexander Kappes, CEO of Groupon UAE who since his arrival at the post saw the quality control carried out by the company improved. However, at the end of the day Groupon is a marketing platform, much like a billboard or publication, he explained.
Taking it easy
“We are offering only two deals a day,” tells Sevak. “In this way we are able to guarantee quality to the customer and at the same time guarantee exposure on the front page to every provider.”
According to Sevak, many companies are blinded by the easy benefit they make when showcasing a lot of deals on their website. “They care less about the quality of what they are offering; they aim for the quantity of deals.”
For the customer, there cannot be enough deals on offer and despite the pitfalls and flaws, the buying power does not seem to be affected. “Over 200 deals were sold by us in 2011 from the time our site went live in March 2011. This amounts to thousands of vouchers being sold, which resulted in millions of dirhams being saved,” says Tareq referring to his site Nail the Deal.
“The UAE market offers a young population, high internet penetration and increasing interest in E-commerce offers and online shopping,” says Alexander explaining the success of Groupon in the UAE.
“The incredible development of the UAE within the past 40 years has shaped the attitude of its people towards embracing new technologies and great new business ideas.”
“Regular online buying has been around for years but group buying has come and addressed the immediate needs of customers and vendors,” Tareq adds to that. The traditional online buying model was also not exciting enough to get a huge number of people to try new things, but by offering deep discounts group buying does that – who wouldn’t want to go on a luxury yacht cruise at 80% discount?!”