Will selling through Ensogo and other social buying sites damage your brand?

Filed as Editorial, Reviews on June 28, 2011 5:30 am

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Ensogo. Great for bargain hunters, but how about merchants?

I’ve been receiving pretty good offers from Ensogo over the past few weeks now and I am surprised by the amazingly low prices they have.  Almost every single thing is marked down or discounted by at least 50 percent and the quality of the stuff they are offering  seems pretty good.

Ensogo, like Groupon, is a social buying site and was recently acquired by LivingSocial, one of the major Groupon competitors.

In their e-mail to me today, two things interested me immediately: an offer for a Php600 (about US $ 15.00) Berting’s Grill gift certificate discounted at P300 (about US $ 7.50) and a 3-day, 2-night stay at the Boracay Terraces Hotel going for P7,700 (about US $180) when it would normally cost twice that much.

And, having just opened up a bank account that links up with PayPal (but you can also pay via ATM Peso Pay or bank transfer), I might just buy that gift certificate from Berting’s Grill and use it to buy several orders of their fabulous barbecued chicken ass and liempo or pork ribs.  As for Boracay Terraces Hotel, well, it’s something that I really got to discuss with my wife first — but it looks like a pretty good buy.

All in all, it’s almost a revolutionary site for bargain hunters like me but it may not be all that amazing for merchants who get into social buying sites expecting “magic” to happen.  A long time acquaintance who sells organic food online clued me in on a couple of caveats and cited a couple of reasons why he isn’t a fan of Ensogo — at least, not yet.

Ensogo, coined from the words Entertain Social and Go was officially incorporated as a legal entity in Thailand in 2009 and then, about a year later, the company started up operations in the Manila, Philippines in July 2010.  It is one of three companies acquired by Living Social this week and represents a major expansion into Asia.  Other sites have harped on its rivalry with Groupon, the leading social buying site.

On Facebook, Ensogo Philippines has a bustling page that currently has 176,521 fans and is about 70,000 fans behind Ensogo Thailand with 241,077 fans.  Fans on both Ensogo pages get the heads up on the latest deals here in the Philippines and the comments sections under every post seems quite active.

On Twitter, Ensogo Philippine’s followers is still a long way from breaching the 10,000 mark — which according to Chuvaness (Cecille Van Straten) basically indicates if you are somebody.

Ensogo Philippines country manager Alejandro Cruz asserts in an article on Manila Bulletin that: “Social buying is now an integral part of e-commerce in the Philippines. Being featured on Yahoo! Philippines will allow us to reach a wider audience and allow them to be a part of the growing number of users who have discovered the advantages of social buying.”

Of course, there is a fair amount of hype in Cruz’s statement, but that’s to be expected.

My own conversations with Simoun Ung and Gary Lauriano, both of whom lead companies that provide IT B2B services, generally paints the Philippine e-commerce landscape in less than rosy hues.  From what I gathered from our conversations, banks here still have to catch up with the rest of the world when it comes to e-commerce and moreover, Filipinos still have to gain a bit more confidence in conducting online transactions. And with their confidence being the way it is, it probably doesn’t help that there is one unverified, recent account of a scam involving Ensogo.

As of this writing, I am still searching for information on Ensogo’s ad revenues either in Thailand or in the Philippines that would somewhat validate Cruz’s assertion.

In another conversation last night with a pretty successful merchant, I was told that Ensogo might not at all be a sustainable route as far as online advertising is concerned.

The reason? Well, the deal with Ensogo is that the merchant is asked to offer his product at a discount of at least 50 percent and perhaps, to some merchants, that’s already a pretty hefty cut.  Now, imagine if you will, the discount group asking 40 percent of whatever is left over as its service charge.

I’m still pretty hazy about this, but I’m figuring it this way: If a product is originally priced at 10o bucks, Ensogo offers it at 50 bucks. Now the merchant gets 50 bucks and out of that 50 bucks, Ensogo either takes 40 bucks (or 40 percent of the original price) or 20 bucks (or 4o percent of the remaining 50 bucks).  The merchant may end up selling something worth 100 bucks for as little as 10 bucks or 30 bucks.

Moreover, what little money the merchant has coming to him can be tied up with Ensogo for as long as one year.

What this looks like, basically, is that the merchant seems to give Ensogo products for free for Ensogo to sell and make a 40 percent profit from. Plus, if it were at all another means of advertising, the company has little to show beyond the visit statistics of its own site.

Further on, the merchant says if the discount was treated as a promotional expense, it would be very difficult to sustain for more than a quarter or three months. Most, likely, those who sign up merely do so to try the service out.  He quipped that he has yet to see a merchant that signs up for Ensogo for a full year and those that do sign up are most probably in it for the short haul.  He also observed that some of the merchants that signed up for Ensogo are either recent upstarts or brands that have peaked ages ago.

The merchant pointed out that Ensogo Philippines probably has to learn that some businesses don’t necessarily need to have a massive customer base in order to earn.  Niche businesses, like his, thrive on producing products at a the highest level of quality possible, providing exceptional service, and keeping a highly targeted set of buyers happy on that basis.

For someone committed to selling an excellent product and is actually doing good business even if they’re priced at a premium, it is somewhat unthinkable to sell their product at a ridiculously low price — even if it does gain them new customers.  The concern here is that a quality product being associated with a “cheap” price strategy might work against the company in the long run.  The last thing that one wants his or her product associated with is “cheap” or lacking in value or quality.

But, then, this is not to say that Ensogo has or will have that effect on a brand.

An article in Tech Crunch has done a pretty good job defending Groupon (the company Living Social wants to overtake) and it points to a number of take aways which can apply to Ensogo too:

  1. Those who avail of a discount promo often spend more on other items.
  2. It creates traffic and can introduce your products or services to people who haven’t tried it before.
  3. New customers gained through discount promos can be turned into regular buyers at full price.

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  1. By Henna posted on August 31, 2013 at 10:05 am
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