James is right. There is an opportunity. But, that window of opportunity in Japan seems to be closing quickly. Competitors to Groupon are out already. The two that are quickly staking their place in Japan are Pomparade (owned by Recruit - a stalwart and major influence in Japan) and Kaupon (privately owned by Kiramex) both well known in the Japanese market.
Groupon has committed the Cardinal sin that many companies from the west committed before in this country; they came to Japan and didn't make the effort to understand the Japanese and this country well enough. Now they will pay the price for that mistake. I've written before in an article entitled, "How New Companies Can Succeed in Japan - and How They Fail." It's about how, in spite of the fact that giant players from the west came to Japan, with great products and a successful track record in the west - such as Pepsi Cola, Universal Studios, E-Bay, Carrefours, etc. - they failed miserably because they didn't take the time to learn the intricacies of Japan and how to do business here.
The companies that do well here, Disney, Coca-Cola etc. Did bother to understand the market and now they dominate. McDonald's, in fact, even changed their name to fit in with Japanese pronunciation! McDonald's in Japan is not McDonald's. It is "Makudonarudo." Go up to any Japanese and ask them where a McDonald's is and they won't have any idea what you are talking about.
But I digress...
Failure in Japan
Groupon, I predict is the next in a long line of failures in Japan. In fact, today I met with a friend who is the head editor of one of the biggest magazines in Japan and this editor said, "There's no way for that company, Groupon... Their reputation is already shot. And, in Japan, reputation is everything. The women don't trust it."
This was the first time that someone who knows how the average Japanese woman feels telling me what I had already suspected; Groupon Japan has a terrible reputation with the women in Japan and it's getting worse.
"I have a bar in Chiba and sold coupons through Groupon once in 2010. For about 17 coupons sold, there were about 10 redeemed (roughly 25 new customers), 2 of the groups came back once more, the rest just took advantage of a cheap meal. So much for creating "repeat customers..." For a ¥3000 coupon they (customers) got ¥6000 of food and drink. Embarrassingly, (I know..!) my FL ratio is nearer to 2/3 than 1/3, so I lost money in the vain hope of gaining repeat customers... I'm in Chiba city, but the customers came from all over the prefecture... If you figure the "cost" of the coupon = loss of revenue (opportunity) ¥3000 + commission ¥1500 + FL (OK, let's be nice) ¥2000 = ¥6500 for ¥6000 worth. I guess that's a total loss. Groupon approached me again to try a different menu strategy, yadi, yadi, yadi... My reply was, "I could stand on the street in front of my bar and give out half price drink vouchers to passers-by (who actually live within stumbling distance!) for a predictably much better return. Thanks, but no thanks.." I agree that it's unsustainable. I've been approached my similar "flash marketing" sites, offering a better commission, etc, but at the end of the day it's probably just coupon clippers who will take advantage of you. Thanks for confirming what I paid to learn!" Thanks to you for writing! Your input is invaluable and your experience might just save some others from losing money.
Well, dear readers, there you have it. From the mouth of someone who has actually done this with Groupon. Considering how much bad press Groupon gets (actually have you read any good press on Groupon?) I wonder how much longer they can do this.
Groupon, I predict, is the next in a long line of companies from the west that failed miserably in Japan. They won't be the last.
Thanks to James B. Allen and his buddy in Chiba! You guys rock!