Firm offers social buying discounts

2011-02-18 14:17
Cape Town - A company is hoping to exploit the network effect of social media on the internet by offering users discounts on merchandise.

"We have a simple philosophy: If you want it, you buy it, if you don't, you don't," Wicount CEO Aaron Toys told News24.

The company aims to register users who will be offered merchandise discounts in their area, and if a pre-determined number of subscribers express interest in buying, the discount is given.

Toys said that the company earned its revenue by taking a commission on all sales.

"We'll approach a vendor to feature on our website and negotiate the minimum number of purchases. We take the risk and our success is tied to our marketing to customers."

Subscription fees

While the format may seem a natural fit for social networks, Toys said that they elected not to build the site for Facebook integration.

This may hurt that company as it is potentially excluding the millions of social network users from the service and may open to the door to competitors who will take advantage of the social networks like Facebook or even MXit.

The service is similar to internet shopping heavyweight Groupon which has recently launched in SA. It was also the subject of a possible takeover by Google for $5.3bn and whether a local company can compete remains to be seen.

The success of the discount business model may create problems for small businesses in that they may be swamped with orders they cannot meet.

Toys insisted that the firm will not charge subscription fees like some competitors, and that online safety is a prime consideration.

"I'm totally against joining fees and we have over 20 000 people subscribed. That's pretty good or pretty bad if you look at some of our competitors. But we have a very high activity rate.

"We have a payment gateway and we don't even see credit card numbers, so there's no security threat. We reserve funds until the deal hits that tipping point and then we make the payment request," Toys added.

There is no dedicated mobile site yet, and this may hurt the company as mobile penetration is higher in SA than computers connected to the internet, but Toys said that the company is looking in that direction.

In terms of expansion, the company has plans to increase its operations in Johannesburg, Cape Town, Durban and Pretoria to smaller hubs and perhaps into Africa.

- Follow Duncan on Twitter

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