Latin American deal of the day website Peixe Urbano's new office in Santiago, Chile, has sparse furniture and still smells of wet paint.
Fresh-faced founder and CEO Julio Vasconcellos has a striking resemblance to Mark Zuckerberg, and perhaps it is no coincidence that he was the first country manager of Facebook in Brazil. Though he's Brazilian, Vasconcellos is a product of Silicon Valley. But he saw the opportunity to bring the discount coupon concept south of the border during the boom of those sites in the US in 2009.
These websites are already very popular in Latin America, with the likes of Groupon, Spain's Groupalia and numerous small players. But there are already signs of consolidation, and to get a foothold in Chile, Peixe Urbano - which in Portuguese means "urban fish" - acquired a small player called Queremos Descuentos to tap the local market knowledge of its owners. Similarly, in Argentina, Peixe Urbano acquired two players.
"These people know the market and the city. We can teach them about best practices of putting things together, and they can plug in their knowledge of the system," Vasconcellos said.
But acquisitions are not enough, and with little to distinguish one discount site from another - with all offering discounts of 50%-plus in restaurants, bars, hotels, health spas, etc - survival lies in the quality of the merchants selected, customer service and general operational efficiency, according to the executive.
Peixe Urbano uses SAP's (NYSE: SAP) ERP and Salesforce.com's (NYSE: CRM) CRM to help the company develop best practices centrally as regards processes and operations, as well as to train merchants and improve the quality of the offers.
"We have more than 2,000 offers per month. Each deal is a different contract and each contract has multiple payments, so SAP helps integrate all of those processes and adds more credibility and efficiency in a scalable way," Peixe Urbano communications director Leticia Leite said.
Vasconcellos and three other Brazilian startup entrepreneurs living in California's Bay Area began tinkering with the idea in 2009. After initial tests showed there was an appetite for the concept in Brazil, the entrepreneurs rounded up the support of US and Brazilian startup investors like Monashees Capital de Brasil, Benchmark Capital (the same fund that invested in Twitter and eBay), Tiger Global Management and General Atlantic. They also enlisted the backing of famed Argentine tech entrepreneur Wenceslao Casares, who is now based in Silicon Valley.
After launching in Brazil in March 2010, the company had 1mn users by August that year and 5mn users by December. It now has 15mn users.
The company claims to have saved its customers a total of 1bn reais (US$564mn) through the some 10mn coupons it has sold. Peixe Urbano launched operations in Chile last week - its fourth Latin American market after Brazil, Argentina and Mexico.
Though much smaller than the other three markets, Chile is a good next step, with a strong internet base and solid and growing economy.
According to the Santiago chamber of commerce, 41% of Chileans are now active internet users, and 85% of these have Facebook accounts.
Social networks have been key to Peixe Urbano's growth, particularly Facebook. In Brazil, Facebook has now overtaken the popular local social network Orkut with a total of 30mn accounts nationwide. And 1mn of that number follow Peixe Urbano's profile.
CONSOLIDATION AND COUPON EXHAUSTION
One may ask, Is there enough market for all the players that have appeared? There already has been some market consolidation, which Peixe Urbano has taken part in, and Vasconcellos sees room for 2-3 big players in each market.
And haven't customer gotten tired yet of having their inboxes cluttered up with offers of dental whitening, nail salon sessions and reduction massages from numerous different players?
Not really, says Vasconcellos; but the market has shifted somewhat.
"We're seeing that some of the novelty is not as apparent as it was before in the more mature markets.... but people are now buying less for the novelty and more for the core value proposition," he said.
Peixe Urbano research in Brazil showed an 87% customer satisfaction rate with the coupon experience, with many saying they would go back to the establishments they visited and recommend them to friends as well. And 75% of those merchants said they have been able to retain those new customers.
IS IT MORE FOR WOMEN?
Industry wide, deal of the day websites tend to appeal more to women than men with a ratio of around 60:40, and Peixe Urbano is no exception. Health and beauty product offerings tend to predominate, accounting for some 25% of coupons sold for Peixe Urbano. Other key segments are restaurants, entertainment and tourism.
But women and men are now using the sites to buy gifts for one another - for example, a woman buying an adventure tourism holiday for her husband. And there are some differences, depending on the country, with health and beauty being particularly strong in Argentina and tourism more so in Brazil.
While Vasconcellos has no immediate plans of where to expand after Chile, he sees Colombia and Peru as the next biggest markets. The company will also focus on intercity growth and target different economic segments within the cities where they have operations.
Then there is the million-dollar question that many tech startups tend to skirt around. Are you profitable? Vasconcellos' answer is equally enigmatic. "Some months yes, some months no."