The group buying model and the Nigerian web market

May 29, 2010 by I. Njoku

The unavailability of an online electronic payment system for mass use is a serious hinderance to online commerce in Nigeria. Until a solution is found and made accessible for everyone, the growth of online buying and selling will be greatly limited. One or two companies have tried to work out a solution but the wide spread practice remains to physically pay money into a bank account for products spotted online - that defeats the whole meaning of online shopping. Despite this handicap, certain online business ideas could still work massively. I have been looking at a business that rapidly caught on and has been valued at $1 billion in less than 12 months of launching. I am talking about the American company Groupon - the group buying startup.

Group buying websites locate and agree on discount deals with merchants and then offer them to their user base on a mass buying basis. Depending on how many people indicate interest, if the merchant is happy, he sells off the goods at a much reduced price. Everyone is happy. The merchant makes profit albeit a bit reduced and the buyers get their shopping at a reduced/discounted rate. The website also get their commision for facilitating the deal.

How will this work in Nigeria despite the absense of online cash transfer. The only difference is that customers will have to physically walk up to the shops to claim their goods and pay over the countrer. The main objective of the exercise is still achieved - that of getting a good discount deal. It would be more convinient if the service is location sentsitive so customers dont have to go far but are offered all available deals in the locality.

Groupon has been copied massively since it first came out. In England, Germany etc, Groupon clones have sprung up and are doing massive business. If an idea gets so much copycats, it has got to be workable or bankable. According to this Techcrunch post, within a few months of arriving on the scene, investors valued Groupon at $1 billion.

To implement a Nigerian version, one would need a well designed website and a good sales man to sell the idea to the local shops. A massive publicity boost will need cash otherwise head for the streets and talk your heart out. Further enhancements can be to incorporate alerts via sms messaging to inform users of latest deals. Of course your deals need to be location focused since the postal system is not exactly wonderful. People will find it most convinient to shop locally as said earlier.

Will this idea work? Look up Groupon or Groupola on Google and decide for yourself.