By Don Young Jr – Daily Deal Media
Money to be made in the Middle East
Groupon’s Middle East division has been keeping a close eye on the economic and political developments of the Gulf Cooperation Council (GCC). The GCC includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates. Jordan and Morocco have been invited to join the council. On 6 March 2012, the six members of the GCC announced that the Gulf Cooperation Council would be evolving from a regional bloc to a confederation, in possible response to Arab democratic unrest and increased Iranian influence in the region. This proposal is strongly backed by Saudi Arabia, but doubts have been raised by the other countries.
According to Claire Valdini of Arabian Business.com, Groupon’s Alexander Kappesin addressed the possible expansion issue; “Right now we are looking at the region. The markets that are most interesting right now are the GCC markets like Qatar, Bahrain and Saudi Arabia. Kuwait and Qatar have been showing very strong GDP growth over the past couple of years and due to the size of them – they have a large expat community – it’s an interesting market because you can go in there and start business very quickly. We want to do the whole market at once. In Saudi Arabia you need to scale the company and business very quickly… we would be looking at least one head office or two head offices.”
Expansion amidst a market contraction
Groupon’s expansion plan includes opening as many as six new offices in the GCC region. The flip side of this equation is that Groupon also anticipates further consolidation in the UAE. Several daily dealers have already abandoned the Middle East ship citing increased competition. LivingSocial in August said it had closed down its operations in the region as it moves to concentrate on opportunities in other regions.
Although Groupon (Middle East) is profitable Mr. Kappesin expects a major consolidation in the UAE market. “Right [now] we are looking at around 27-30 businesses in the market… I think a good number would be about five businesses if you are looking at businesses that can cater to different needs.”
How about 50% off a barrel of oil?
Those that follow Groupon have seen the company struggle during the past year and share value plummet by 75% from the IPO price. The company is seen as taking major steps to solidify itself as the go to daily dealer in various regions. This month, Chief financial officer Jason Child mentioned in corporate briefings that the company is taking steps to help drive its growth in Europe.
Mr. Child stated that the website will introduce technology that enables the website to send more relevant deals to its subscribers in Europe. “It’s one of the primary drivers we expect to see in the back half of this year. That should be one of the solutions for helping us to drive growth in the future.”
The question of sustainability of the daily dealing industry continues to be a topic of conversation. For many of these sites that sprang up over-night, it has now become a life or death struggle for corporate survival. Thousands of shareholders are hoping that Groupon can pull this out and get to profitability sooner than later. Considering some of the deals that Groupon has offered I wonder if 50% off a barrel of oil is too much to ask for.
ArabianBusiness.com
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