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Spanish collective buying website Groupalia is not planning expansion into new markets in Latin America for the moment, but it does envisage some consolidation soon of the players in this fast growing and highly competitive business, Groupalia CEO Joaquín Engel told BNamericas.
The collective buying business is all about reaching scale, so inevitably some are going to fall by the wayside or be eaten up by bigger competitors.
"I think some of the competitors are going to disappear because there are a lot of players and there is not sufficient market for all. There's going to be consolidation. The two American players are buying their positions in the markets where they don't already have presence," he said.
Groupalia launched in Spain in May 2010 with startup capital of 3,000 euros (US$4,111) and rapidly expanded throughout the year to Italy, Brazil, Argentina and Chile, and now also has operations in Mexico, Peru and Colombia.
With its current operations, Engel believes Groupalia has 90% of the potential e-commerce marketplace covered and will concentrate on those countries for the moment.
After 17 months, the company is now seeing 12mn euros a month in coupon sales, compared to a total of 7mn euros from May to December 2010.
The second phase for the company is to become profitable, Engel said. "We need to migrate from being a startup to becoming a company."
Groupalia takes a third of the coupon revenue for itself, which Engel said sounds like a lot, but is not considering the value that is created for the customer.
According to the executive, of all of the company's first-time customers, 50% return at least once to use Groupalia. And a survey showed that more than 50% of buyers say they would be prepared to pay the full price for the service they first received with a discount coupon.
And Groupalia data shows that companies that have used its campaigns have received on average 70% more website visits than before.
"We are the marketing concept of the future. Companies that want to carry out a traditional advertising campaign in a magazine or TV have to pay a fee up front and don't know what their return on investment is going to be," Engel said. "In the online world, you used to pay per click on a banner. We have a model of charging per buyer."
Women have tended to represent the largest part of purchases through collective buying websites - in the case of Groupalia 60:40 - as they are more impulsive buyers, Engel said.
The nature of products has focused largely on health and beauty services, restaurant tickets and travel.
The average customer is a young professional who is highly connected to social networks and constantly seeking new experiences and trends.
Groupalia Chile's incoming country manager, Ricardo Dorado, said the preferences of men and women were clearly marked, with men saying they prefer more adventurous travel to the south of Chile, for example, while women prefer trips to more exotic locations like Brazil. In retail, men tend to prefer electronic devices and women prefer shoes.
In Chile, Groupalia grew 285% in its first year. It has carried out 1,800 campaigns with 1,000 collaborators and has had 1.5mn users.
Looking ahead, Groupalia is hoping to try to consolidate the offer in its five countries in Latin America as if it were one. This will work in particular for travel offers between those countries.
Engel sees the company in the future not as a coupon seller but as a strategic marketing company, designing tailored campaigns for customers.
Amid the almost saturated market of discount coupon vendors, Groupalia says it is number one or two in all of its markets except Brazil, where it is fourth, something that Engel believes is still respectable given Brazil's size. Besides the regional giant Groupon, Brazil's Peixe Urbano is a major competitor.
As regards differentiating itself, Groupalia believes its attention to carefully selecting which companies to partner with has given it a reputation for quality rather than quantity.