Groupon Korea

It has been six weeks since Groupon, a U.S.-based social commerce company, launched its service in Korea on March 14, 2011. It is a little bit early to access, but the company’s grade is lower than anticipated.

Many people expected and hoped that Groupon would provide special services different from the domestic companies’. The start, however, was not good. The first coupon was sold out barely, and even many deals have been failed. Considering the companies’ experiences and the brand power, the result was disappointed.

The boom of social commerce in Korea started with the success of Ticket Monster, the number one social commerce company of the nation, established in 2009. Since then, the social commerce market has been growing incredibly fast. The market volume in 2011 is estimated US$462 million, 10 times bigger than the one in 2010. There are more than 500 social commerce companies, but only three leading firms, Ticket Monster, Coupang, and We Make Price, are holding around 90% of the market share. Groupon Korea’s market share is only less than 7%.

Groupon Korea officials say that they are satisfied with recent sales volume and the speed of growth will be getting faster. Actually, there is some good news for the company. The company has established a strategic alliance with SKTelecome, a nation’s number one wireless company. In addition, it seems to finish building the sales network in nationwide.

Groupon Korea, however, seems not to understand fully about the Korean consumers’ tastes yet. Every foreign companies stress on the localization when they enter into the Korean Market, but in fact, many of them have astonishingly reluctant to the localization. Korean consumers are very sensitive and difficult to deal with. Therefore, companies which show poor understanding about the market have been failed and have to withdraw out of the Korean market, even the world-famous companies such as MySpace and Second Life.

Furthermore, the company has made a critical mistake. It sold Private Lounge, a membership social commerce company dealing with luxury goods, to We Make Price, one of strong competitors in the market. Current social commerce market’s growth will reach the limitation within years considering both the volume of the Korean market and the keen competition in the market. In that point, the premium social commerce market will be the substitution. The rich market of Korea in online business has great potential and Blue Ocean. Groupon Korea has given up the lucrative market by itself.

Many major companies of the nation are planning to enter into the social commerce market. The competition in the market will grow more intense. Once the big firms used to the Korean market advance to the market, Groupon Korea will face more difficult environment.

“We will achieve $9.2 million in monthly sales (20% of the market share) within the first half of this year,” Hwang Hee-seung, CEO of Groupon Korea, said at a press conference in March 14 2011. In this point, his goal looks too ambitious.