The cultural obsession with discounts in Southeast Asia seems to have seen different narratives throughout the years. It began when Groupon (now Fave) entered the market in early 2010s, offering massive group-driven discounts on restaurants, and spas. Gripped by greed, many users tend to buy coupons mindlessly only to use it at a later date.

Later, 2014 saw the rise of cash rebates startups such as Shopback. Its business model thrives on (and depends) marketing partners’ willingness to spend dollars to acquire new customers. For every amount spent by the customer on any shopping platform that integrates with Shopback, the customer receives a “cash-back” and Shopback gets a cut.

It made discounting and deal hunting – smart and satisfying, unlike its predecessor (Groupon).

What is CupoNation, and what are they doing in Southeast Asia?

CupoNation (now Global Savings Group) is headquartered in Germany, and was founded in 2012 – with funds from Rocket Internet. By 2016, it claimed to be profitable.

After so many years, has the time come for Rocket Internet’s CupoNation to finally shine? After all, the ecommerce market has matured exponentially, that discount players can command good valuation servicing this need.

However, Global Savings Group still went on anyway and raised a Series C round, at roughly US$22 million in the fourth quarter of 2017. It currently operates in 19 countries, and counts on partners such as Amazon, Flipkart and Paytm.

Interestingly, this Rocket Internet backed startup recently decided to launch in Indonesia after having done so in Singapore (2013), Australia (2014) and Malaysia (2016). As they clearly did not have any track record being aggressive, (unlike their sister company Lazada), could this be the beginning of something much bigger?

Is Rocket Internet finally looking to consolidate the discount players in the Southeast Asian market (we know Rocket Internet is flushed with cash)?

Confusing play by competitors

Other players in the discount market have not been sitting still (perhaps due to lack of growth). Fave have decided to launch themselves into the payments market through FavePay. Shopback, on the other hand decided to acquire Seedly, essentially moving into the personal finance space.

Our team have talked to merchants (in Fave’s homebase of Kuala Lumpur) for feedback – most merchants only get one or two customers in a month who actually pay using FavePay.

Why are the existing players seemingly moving into completely unrelated industries? Has the discount market reached the point of saturation? Even if the big players such as Lazada were to continue spending, the growth existing discount players are seeking will only be possible if more competition entered the market, thus forcing more marketing spend.

Existing near-monopoly of the market by Lazada/Alibaba will definitely put discount players’ growth projection models into question.

Our thoughts

It is possible that Rocket Internet is again looking for quick wins in the Southeast Asian market? We entertain this possibility because existing players do not yet command high valuations (and some might even be running out of funding).

In addition, having all but cashed out (through firesale) most of their ventures in Southeast Asia, it is now again important to have some foothold in the thriving region of more than 600 million potential customers.

However, Rocket Internet shouldn’t underestimate existing players such as Fave and Shopback who have pretty much established themselves with a solid foothold. After all, when it comes to merchants; as it usually revolves around the same household names in hotel or shopping. This is going to be an interesting space to watch and it starts with who runs out of money first!

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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