Groupon's struggling in Korean Market

Service business market in Korea is very tough market for foreign companies. Korean customers want not only cheap price but also high quality services at the same time. This is the same reason that Walmart failed to attract Korean Customers who want both low price and department store level customer service. 
Walmart’s attempt to penetrate into the Korean market in 1998 is considered a classic example of both the failure in localization and a false entry in an already saturated market. The world largest retailer exited Korea in 2006.(I would like to mention it later.). 
Since then, many global companies have followed in the footsteps of Walmart and pulled out of the local market.


Today, I would like to talk about the story of Groupon which still is struggling in the market.


Groupon, the world No.1 Chicago-based daily dealer which was founded just three years ago, has seen its customer base surpass 50 million in over 500 cities worldwide generating record sales of $760 million last year.


However, despite its aggressive low-pricing strategy, Groupon is struggling to grow here due to its local counterparts’ strong footholds. It officially entered the Korean market in mid-March 2011. Many spectators were anxious at that time whether the daily deal giant would dominate the Korean market in a short-period of time like in other parts of the world.


Groupon Korea has targeted sales of 200 billion won or $176 million 2011 and to catch up with two leading local competitors, Coupang and Ticket Monster. Now, it still stays at a distant third in the ever-intensifying social commerce market. 


There are two key reasons why Groupon is struggling in the local market, according to experts. 


First of all, the domestic daily deal sites have already preoccupied the supply-side of the market.
Korean players such as Ticket Monster and Coupang have already secured most major product suppliers, which makes it hard for late comers like Groupon to catch up.
This business is a “winner-gets-all” market because just like any other information-based businesses, suppliers from big manufacturers to mom and pop stores, all prefer to work with the top daily deal sites with larger access to consumers. 

Secondly, Groupon didn’t have an in-depth understanding of the Korean market. The coupon giant was selling high-end products, including tickets for luxury events which are of little interest to most site users in Korea who are looking for cheap real-life products.
“Groupon just implemented the low-cost and high- efficiency strategy to the Korean market without any consideration of the regional characteristics. On the other hand, domestic companies like Coupang are adopting marketing strategies tailored for domestic consumers, hiring famous celebrities for their advertisements and providing female-targeted products,” an official from a local deal site told the Korea Times on the condition of anonymity.


Comparison of business model in Korean Social Commerce market











Source : http://www.koreatimes.co.kr/www/news/biz/2012/06/328_99113.html
http://www.koreatimes.co.kr/www/news/biz/2012/06/334_87863.html