Entrepreneur

A Competitor Gives His Two Cents On KFIT's Recent Acquisition Of Groupon Malaysia

The modernisation of the health, beauty and wellness industry brings about a new change of marketing tactics when it comes to pushing out the right service.

Gone are the days when traditional methods of brochures and new launches were enough to keep the industry sustainable.

The past five years has seen small and medium-sized businesses in the fitness, beauty and wellness services industries turn to deal sites, then subscription-based marketplaces to get their new products out and acquire new customers.

KFIT’s new acquisition of Groupon Malaysia represents this as they make one step forward into integrating this business model for their next venture, Fave.

Fave works by providing loyalty solutions and flexible offer structures by offering deals to loyal customers. It functions both as a discovery and deals platform.

Peter Seow, the CEO of Activpass, a tech startup dealing with business management and customer engagement software for small, medium businesses and independent professionals in the fitness, wellness and beauty services industry, had some opinions about the matter and the industry in general. He shared his views with us below.

KFit’s Acquisition Of Groupon Malaysia

Image Credit: hitsss.com
Image Credit: hitsss.com

This move made by KFIT caused a bit of speculation regarding its future but Peter believes this is another plan made to further advance their business.

Whether it is pivoting away from the original business model or moving to part two of a grand plan, he is certain that this is KFIT’s decision to move things forward.

“When KFIT bought over Groupon Indonesia, they were able to respond effectively to the needs of the market by making voucher redemption mobile.

However, with the closure of Ensogo along with Groupon’s exit in several countries and structural change, the future of doing businesses primarily in deals and flash sales is going to be tough,” said Peter.

The State Of The Industry

To give a bit of background, Peter has been in the business of loyalty programme and rewards industry for over twenty years.

In that time, he noticed a problem faced by small, medium businesses and independent professionals in the fitness, wellness and beauty services industry.

The industry itself may be moving towards digitisation to keep up with the trends of modern society. However, many businesses still lack the proper knowledge and technology to maximise their operations while trying to effectively scale and market their businesses in order to acquire and engage with new customers.

“A number of businesses are using traditional methods to manage their business and operations. Some even use paper, pen and books to manage their customer list, appointments and requests.

At the same time, a vast number of businesses are also still using traditional marketing tactics such as print advertisements and through word of mouth, and do not have established marketing strategies,” shared Peter.

The past year has also seen many subscription-based marketplaces increasing their monthly subscription fee, or putting a monthly limit to the number of classes users can attend as companies face difficulties in generating enough revenue to outpace the cost of paying service providers.

“It is a complicated formula to get right on identifying a suitable pricing structure that benefits both customers and service providers.

For the platform provider, they would want to keep their costs as low as possible. For the businesses that sign up to such platform, they want the partnership to convert leads into loyal customers and produce profitable results,” said Peter.

The Problems Faced

Part of the reason why most merchants refrain from participating in too many subscription-based services is the unprofitable fee from leads that these marketplaces provide, which essentially reduces their profitability.

The ones in pain from this partnership are the merchants. Marketplaces still make money whether or not the customers redeem their package purchase. Therefore they have no motivation to push more customers to the merchants.

Image Credit: newsgraph.ph
Image Credit: newsgraph.ph

“The collapse of Ensogo in 2016 has cast a big question mark on the sustainability of businesses operating primarily in daily deals and flash sales due to the low margins generated from such businesses.

For merchants, the partnership with deal sites frequently end up in them attracting low-end bargain hunters who are chasing the low-priced deal rather than the brand.

This results in low customer retention, and risk devaluing the services provided and invite complaints from loyal customers,” said Peter.

In conclusion, he believes that the subscription-based business model faces the big challenge of failing due to being unsustainable and unscalable, especially in the fitness, wellness and beauty services industry.

Some of the reasons could be attributed to unprofitable business models, high user acquisition cost and/or unattainable breakeven for unlimited class model and single revenue stream and reliant on constant funding.

But with the ever-changing trends that comes and go, who’s to say this is the bleak future of what awaits subscription-based models? KFIT and the like are doing their best to find a model that works. It might just take one good idea and execution to disrupt the industry and revive it.

Feature Image Credit: kfit.com

 

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