UAE going gaga for Groupon

Groupon, which sells discount certificates for goods and services, is making inroads in the Emirates but has competition from sites such as GoNabit, DealGobbler and Cobone.

Aimee Hills, an expatriate professional living in Dubai, has made it part of her everyday routine to check her e-mail for the latest offers from Groupon.com.

She has bought yachting trips, spa treatments, hair products and dhow cruises at discounts of between 50 and 70 per cent.

"Dubai is an expensive city, and these kind of deals help you experience the luxury elements the city has to offer more regularly," she says.

Like Ms Hills, many in the Emirates and across the region are looking for bargains on the web. And it is serious business.

A recent Reuters report suggested that an initial public offering by the US giant Groupon, which is present in cities worldwide, could be valued as much as US$20 billion (Dh73.45bn).

Groupon was launched here this year, but it is competing with regional players keen on gaining a share of this growing market. Companies such as GoNabit, DealGobbler and Cobone, or coupon in Arabic, have emerged here in the past two years.

The financial model behind these daily offer sites is simple. Businesses come up with discounted deals on condition that a certain number of customers take up to the promotion.

In return, the business gets increased footfall, or word-of-mouth marketing and, potentially, new loyal customers. The group-buying websites then take a small percentage of each deal made.

But do the typical visitors to these sites go only for good deals or do they become loyal customers?

Anthony Soethout, the manager of The Gramercy sports bar, restaurant and lounge in the Dubai International Financial Centre, is clear about his views on the likes of Cobone and Groupon: they are tools for creating a temporary increase in short-term business, rather than repeat customers.

"I use them to advertise and to bring new faces to the off-peak hours," he says.

"You get the footfall, but the type of customers we found coming through Groupon - maybe it's because the kind of venue we are - they're more just one-hit or promotion-oriented. They're not converting into loyal guests. But when you run two Groupons, you'll see them at each [promotion]," he says.

It is clear that businesses need to be sure they can manage the volume of coupons agreed on and the costs involved in creating these deals so they do not lose money.

"That's why we only use them for one-offs, because I'm not a hotel, I'm one outlet. There's no other revenue source … to stop the shortfall of cash," Mr Soethout says.

Paul Kenny, the chief executive and a co-founder of Cobone, understands that problem.

"We don't want you [businesses] to lose on the campaign. We want you to get exposure but also to get new customers," he says. "If I approach you as a business, we have a very good idea of how to make a campaign work for you where you still make money."

Mr Kenny goes on to say his company focuses on long-term partnerships with clients, with the aim of presenting not just one-time offers but "multi-promotions".

Regardless of whether businesses use group buying regularly or just once, Cobone, which is only seven months old in the UAE, has been a hit.

"We're selling anything between 8,000 to 10,000 coupons a week now," says Mr Kenny.

"Last month we hired one person every two days, and this month, we're actually going on a similar growth rate."

He now has 50 employees, with the website available in Arabic and English. It accommodates payment by credit card, prepaid card and cash on delivery.

"We've saved the customers of the UAE over Dh30 million," he claims.

Ultimately it is the shoppers who win, often getting experiences or products that would normally be unaffordable to them.

"I think the only true benefit is to the customer, to be honest with you, because what they get from us, and what we offer, is an amazing deal," Mr Soethout says as jazz blares in the background of The Gramercy's Friday brunch.

"And [as] I see the split between us and Groupon, neither one of us is getting richer out of it, but for us it's an advertising tool, it's a good marketing tool and if one out of 10 guests latch on, that's one more guest than you had before," he says.

"And if those 10 people come every time you have a promotion, at least it's 10 people you can count on."