Friday, May 6, 2011

Scoutmob vs Groupon - Is there Competition?

Groupon is one of the most popular "social group coupon" merchants in the marketplace today. The name Groupon itself originates from group coupon. Although I like its concept of offering one coupon per day in each of the markets that it represents, I believe it could have a short shelf life. Now, I don’t mean that it is unsuccessful but it is a lot unlike its so-called competitor; ScoutMob.

This is mainly because ScoutMob does not need any upfront payment for its coupons like Groupon does. The ScoutMob’s modus operandi is that its coupons are held in your mobile phone application module and it is easy to redeem this at any point of sale, similar to a paper coupon. To put it simple, Scoutmob is more of a flash commerce company that is involved in leveraging local deals and content on mobile devices so as to drive new customers to local businesses. Obviously, businesses pay for the service in the form of a flat fee on any single coupon that is redeemed.

However, given the position that Groupon is at present (market value is $6bn which is further projected to grow to $25bn!), it is not that easy to write of Groupon.  I was further shocked to know that it services more than 150 North American markets and over 100 European, Asian and South American markets with a total user base of close to 35 million. Now, Scoutmob is nowhere close that figure, but it has the potential to reach somewhere close.

The bitter fact is that Groupon consumers are not very amused by the bunch of discount offers that hit their mailboxes on a daily basis. This is primarily because, most of the enthusiasm will die down once the economy picks up and chances are that they may not find the discount offers are not that great.

As Groupon is a medium to get discounts from the local store to the consumer, the stores will be interested in Groupon, if the stores can convert a Groupon customer into a repeat customer. If this does not happen, then the business itself will stop supporting Groupon. In such a scenario, the Groupon thingy will likely fade away or it might even just burst. As the coupons are coming from the establishments or business houses, Groupon should help these business houses and for this they need to get their customer service act together very quickly. In fact, in certain parts of Europe the Groupon bubble has almost lost its shine. However, this may not happen in the US markets as they have enough critical mass so as to have the staying power and further consolidate. I think that in the next couple of years they will fall back to the market segment that Groupon was created for. There will always be people looking for bargains but not on the scale we are looking at the moment.

On the other hand, ScoutMob is quite a cool concept and better still they have their act together and have executed their project plan rather well.  However, what they really need to project is that their module leads to repeat business and naturally customer loyalty. The only problem that I can envisage is that most business house would evidence that these deals would perform and lead to repeat businesses. In such a case, any business house would be willing to invest further in customer acquisition. They need to come up with some form of a digital loyalty card thingy that would keep track of repeat businesses. They would also need to make it quickly recognizable and omni-present, somewhat similar to Groupon.

Bottom-line is that there is still plenty of room for growth in this market space. I don’t see any sign of real competition unless there is a real site with about fifty million users.

As long as Groupon maintains its six month exclusives and maintains its deals, it should be smooth sailing for them. In other words, unless there are some solid joint ventures between similar business houses that could generate a content database to the tune of over fifty million users, Groupon is in safe hands.

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