Cool coupons point to Net profit
By Ding Yining |
June 23, 2010, Wednesday
|
Print Edition
Print Edition
YOUNG people looking for something funky but inexpensive to do might consider taking a workshop on chocolate making or eating some of the best cheesecake in Shanghai or having their teeth whitened.
Shanghai entrepreneur James Fang, 24, a former consultant with McKinsey & Co, has started a business to help those with a yen for something different to search out niche activities, food and entertainment at a low price.
His cooltuan.com Website is patterned on the popular "Groupon" Internet business model pioneered in Chicago.
It works like this. A retailer will offer a meal, a movie, an outing, a massage or some other service in a deal-for-a-day at a discount rate of up to 70 percent. The price, however, is contingent on a minimum number of people signing up for it.
"It's a brilliant idea," Fang said. "It draws customers to small, chic shops that can make more money without advertising fees."
On one recent day, cooltuan.com offered 10 classes for fitness training or swimming at the local Stargym with 800 yuan (US$117) value at a price of 330 yuan, with a minimum 10 people required to sign up.
In the end, a total of 74 people signed up, using the online pay system Alipay, a unit of Alibaba Group, to pay for their vouchers. The membership cards are delivered to the address users left at the Website and there is no time limit for the vouchers for fitness training.
The gym got over 20,000 yuan for the deal, and Fang pocketed around 2,000 yuan from the commission he charged the vendor.
Fang started his online business in March after hearing about the Groupon business model while talking to colleagues about six months ago. At the end of the year he quit his job and scraped together 1 million yuan from two individual investors as start-up funds.
It's one thing to hold an undergraduate degree in international trade from Fudan University but quite another to start up a small, new Internet business, Fang discovered.
"I'm under huge pressure compared with my days at McKinsey because now I have to deal with my own business every day," Fang said. "But I feel I've achieved a lot starting a Website from scratch."
He's hoping his business venture will be as successful as Groupon in the United States, which started operation in November 2008 and has now expanded to dozens of US cities. In April, Groupon secured US$135 million in funding from the Russian Internet investment group Digital Sky Technologies and from co-investor Battery Ventures. The Washington Times even declared that the Groupon concept has become "a movement."
But can it also become a hot trend in China? Fang is not alone in thinking that it will, and that opens enormous prospects in the world's biggest Internet market. There are currently more than 100 similar Websites operating in Shanghai, Beijing and Guangzhou, and some of them are already expanding to other cities. Most of them were launched this year. Fang figures he's gotten into an exciting new business on the ground floor.
"We have to be quick and establish our position while there are still not many local competitors," Fang explained.
It's a business model attuned to the times in China, where the Internet-savvy younger generation is looking for offbeat restaurants, coffee shops, massage houses, beauty salons and other places to patronize. Some get lost in the blitz of glossy advertising plastered across newspapers, magazines and billboards, all seeking to part them from their money.
What better than a Website pointing them to niche locations at discount prices?
Fang rents a 60-square-meter office in a building in Yangpu District for 2,000 yuan a month. He employs four full-time staff and over a dozen part-time sales staff. His team includes IT engineer Yu Qiang and sales director Zhu Yutao.
The site now offers one deal every day from service providers ranging from restaurants to massage clubs. One recent deal offered a 30-yuan voucher for 500 yuan worth of English language training.
The Website is catching on, Fang said. On April 8, it launched a lucky draw to win a one-day ticket to the Shanghai Expo and the latest model of the iPod Nano. More than 1,000 people signed up.
In May, about 1,300 people signed up for one-day deal, not so high as Fang expected while some rivals grab over 1,000 participants in just one day.
The commissions charged shop owners who provide discounts on the Website vary, but are generally low, around 10 to 20 percent for each deal. Most days, the Website barely covers its expenses, Fang said.
Yuan Su, the team's marketing manager, is working hard to convince Net users to try out the new service.
"Several thousand click onto our Website every day, but only dozens or so sign up for offers," she said, her air of confidence betraying a touch of worry. Promoting a new Website is not easy in a city awash with Internet entertainment and restaurant sites.
"We can't afford traditional ways of advertising such as ads in newspapers and magazines because that's expensive and won't reach our target audience - people who spend a considerable amount of time on the Internet."
Cooltuan now spends around 1,000 yuan per day on paid clicks on search engines Google and Baidu.
Yuan, 23, worked at a local advertising agency for about a year after graduating from Fudan University. She heard about the new Website from friends and decided to quit her job and join the new team.
"I found the team very attractive, and for me, the most important thing is to do what I want with a group of energetic and passionate people," she said. "My parents support my decision."
It's still an uphill road.
"We know there are still difficulties ahead, but we can't give up before making a good effort," she said.
Shanghai entrepreneur James Fang, 24, a former consultant with McKinsey & Co, has started a business to help those with a yen for something different to search out niche activities, food and entertainment at a low price.
His cooltuan.com Website is patterned on the popular "Groupon" Internet business model pioneered in Chicago.
It works like this. A retailer will offer a meal, a movie, an outing, a massage or some other service in a deal-for-a-day at a discount rate of up to 70 percent. The price, however, is contingent on a minimum number of people signing up for it.
"It's a brilliant idea," Fang said. "It draws customers to small, chic shops that can make more money without advertising fees."
On one recent day, cooltuan.com offered 10 classes for fitness training or swimming at the local Stargym with 800 yuan (US$117) value at a price of 330 yuan, with a minimum 10 people required to sign up.
In the end, a total of 74 people signed up, using the online pay system Alipay, a unit of Alibaba Group, to pay for their vouchers. The membership cards are delivered to the address users left at the Website and there is no time limit for the vouchers for fitness training.
The gym got over 20,000 yuan for the deal, and Fang pocketed around 2,000 yuan from the commission he charged the vendor.
Fang started his online business in March after hearing about the Groupon business model while talking to colleagues about six months ago. At the end of the year he quit his job and scraped together 1 million yuan from two individual investors as start-up funds.
It's one thing to hold an undergraduate degree in international trade from Fudan University but quite another to start up a small, new Internet business, Fang discovered.
"I'm under huge pressure compared with my days at McKinsey because now I have to deal with my own business every day," Fang said. "But I feel I've achieved a lot starting a Website from scratch."
He's hoping his business venture will be as successful as Groupon in the United States, which started operation in November 2008 and has now expanded to dozens of US cities. In April, Groupon secured US$135 million in funding from the Russian Internet investment group Digital Sky Technologies and from co-investor Battery Ventures. The Washington Times even declared that the Groupon concept has become "a movement."
But can it also become a hot trend in China? Fang is not alone in thinking that it will, and that opens enormous prospects in the world's biggest Internet market. There are currently more than 100 similar Websites operating in Shanghai, Beijing and Guangzhou, and some of them are already expanding to other cities. Most of them were launched this year. Fang figures he's gotten into an exciting new business on the ground floor.
"We have to be quick and establish our position while there are still not many local competitors," Fang explained.
It's a business model attuned to the times in China, where the Internet-savvy younger generation is looking for offbeat restaurants, coffee shops, massage houses, beauty salons and other places to patronize. Some get lost in the blitz of glossy advertising plastered across newspapers, magazines and billboards, all seeking to part them from their money.
What better than a Website pointing them to niche locations at discount prices?
Fang rents a 60-square-meter office in a building in Yangpu District for 2,000 yuan a month. He employs four full-time staff and over a dozen part-time sales staff. His team includes IT engineer Yu Qiang and sales director Zhu Yutao.
The site now offers one deal every day from service providers ranging from restaurants to massage clubs. One recent deal offered a 30-yuan voucher for 500 yuan worth of English language training.
The Website is catching on, Fang said. On April 8, it launched a lucky draw to win a one-day ticket to the Shanghai Expo and the latest model of the iPod Nano. More than 1,000 people signed up.
In May, about 1,300 people signed up for one-day deal, not so high as Fang expected while some rivals grab over 1,000 participants in just one day.
The commissions charged shop owners who provide discounts on the Website vary, but are generally low, around 10 to 20 percent for each deal. Most days, the Website barely covers its expenses, Fang said.
Yuan Su, the team's marketing manager, is working hard to convince Net users to try out the new service.
"Several thousand click onto our Website every day, but only dozens or so sign up for offers," she said, her air of confidence betraying a touch of worry. Promoting a new Website is not easy in a city awash with Internet entertainment and restaurant sites.
"We can't afford traditional ways of advertising such as ads in newspapers and magazines because that's expensive and won't reach our target audience - people who spend a considerable amount of time on the Internet."
Cooltuan now spends around 1,000 yuan per day on paid clicks on search engines Google and Baidu.
Yuan, 23, worked at a local advertising agency for about a year after graduating from Fudan University. She heard about the new Website from friends and decided to quit her job and join the new team.
"I found the team very attractive, and for me, the most important thing is to do what I want with a group of energetic and passionate people," she said. "My parents support my decision."
It's still an uphill road.
"We know there are still difficulties ahead, but we can't give up before making a good effort," she said.
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