Groupon seems like an unstoppable machine on a stratospheric trajectory. It is literally the fastest-growing company in history.fuelled by its profitable business model and thousand-strong sales force, it has stayed a step ahead of its zillion competitors.
Is it possible to beat Groupon?
This man is doing it. Bom Kim is the founder and CEO of Coupang, the biggest daily deal site in South Korea.
Despite having a hundred more employees than Coupang, Groupon is only a distant third in South Korea.
What made Coupang so successful? Is its success replicable elsewhere? We spoke with Kim to find out.
Here are the highlights:
- Coupang has 3 million users out of a potential market of 15 million, with its next competitor a third smaller, and Groupon even further behind.
- Groupon has tried every trick in the book to get to number one in South Korea, from acquiring companies to offering huge pay raises to poach Kim’s employees to subsidizing deals.
- Kim attributes his edge not just to better understanding of the local market, but also to greater attention to customer service and detail, insights which could potentially be replicated outside Korea.
Here’s the interview (edited for clarity):
Business Insider: So first, why don’t you tell us a bit about yourself and your company?
Bom Kim: Sure. I was born and raised in South Korea until I moved to the US in my early teens. I started my first startup in college, worked as a consultant at the Boston Consulting Group for a few years, did a second startup, and went to business school and dropped out of business school to do Coupang.
BI: What were your earlier startups?
Kim: The first startup was called the Current, a news magazine for college readers. We expanded to 20 campuses and were acquired by Newsweek. My second startup was also a print and online media company, a magazine for alumni communities which was acquired by Atlantic Media. [Harvard magazine 02138 -ed] We didn’t make huge multiples for our investors but they were solid hits.
BI: Ok, what happened after that?
Kim: I was trying to find something to be passionate about. I was looking at different models and I couldn’t find anything. So I went to business school, and then Groupon happened. I thought: this is great. I started to interview local merchants and do research. And I thought it was a great fit for the Korean market, which is very urban and very wired.
So after one year at b-school I dropped out, raised a quick round from my earlier investors and headed to Korea. That was last June.
BI: How’s it been going?
Kim: We launched in August, and it’s been a whirlwind since then.BI: Cool. Give me some metrics.
Kim: We now have 3 million members, 700,000 visitors per day, $10 million in revenue–
BI: Is that gross merchandise sales or revenue?
BI: So half as that in revenue?
Kim: The margins here are more competitive, so less than half.
BI: Ok. Are you profitable?
Kim: Not yet as we’re spending a lot on marketing and user acquisition.
Anyway, we now have three million members, when our next biggest competitor has around a million, we post 30-plus deals a day, and we’re adding new cities and regions every week.
BI: How big do you think your market is, or will be?
Kim: We think about 30% of the population is our target, so around 15 million users.
BI: So you already have 20% of this huge, exploding market.
Kim: Yes. And Groupon and LivingSocial have shown that there are lots of interesting verticals to expand into, so we’re excited about future growth.
BI: Nice. So tell me about Groupon in Korea. When did they get in? What are they doing?
Kim: They came in with guns blazing. They started to recruit and set up at the end of last year and launched not long ago, maybe a couple of months.
They acquired a few of the smaller players, they have around 300 people now I think.
BI: So why aren’t they catching up?
Kim: I think they just believed their Groupon brand would make people swoon. They came in with a lot of money and basically told merchants and employees: “We’re Groupon!”
Their deal selection is off, they’re not working with employees and merchants the right way. They got tons of bad press when they launched, because something like half their deals failed to make their minimums to clinch.
BI: We’ve been talking to people about Groupon’s international operations and been almost universally hearing they’re not doing well. What are they doing?
Kim: They’re very aggressive, but they don’t pay attention to what they really wanted. They offered my employees two times their salaries to jump to Groupon, and even wrote publicly on job boards that Coupang employees who join them would get huge salary raises.
And now they even offer merchants money to put deals on the site. But it’s not working.
BI: Why not?
Kim: There’s an art to this. We try to size up merchants to make sure we sell the appropriate volume.
And Korean consumers are very sophisticated and demanding. Our customer call volume for example is really high. Sometimes we’ll get 400 calls for a deal that has sold 1200. People getting lost on their way to the restaurant and asking where it is, or asking whether the beef in the restaurant is Korean or comes from the US. We’ll get over 10 pages of message board posts. So we work really hard on customer service and keeping our customers happy.
Another thing is that the internet in Korea is much faster than in the US, so Koreans expect rich media-heavy sites. If you look at our site you’ll find that there’s a lot of stuff going on. We create original content with photos and videos of merchants. Groupon’s site is just a big image and an email form.
And as for employees, they don’t just care about money. They want to have an office culture and be part of something special.
BI: What would be your advice to someone starting a group buying site now?
Kim: How to put this nicely… Don’t be arrogant. Don’t assume customers or merchants will fall over themselves for you. Pay attention to the little details. Pay attention to customers.BI: Maybe a more general question: why do US tech companies fail so often in Korea? What is it with this market?
Kim: As I said, Koreans are extremely wired and sophisticated. They’re demanding and they have a very high level of engagement with brands and services.
To cater to them you need to be very nimble and respond at lightning speed. When US companies get to Korea they’re usually giants, and they’re competing with nimble Korean startups who know what customers want.
BI: A final thing I’m curious about is mobile. I understand mobile is huge in Korea, and Groupon has very ambitious plans for mobile. Are you doing anything yet?
Kim: Yes, but smartphone penetration is actually low, 20%, although growing really fast. We have a mobile site, and we’re coming out with iPhone and Android apps soon, but we’re not doing anything like Groupon Now, at least not yet.
BI: Interesting, thanks a lot.
Kim: Thank you.
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