KFit to drop e-commerce of Groupon Malaysia, focus on being best sales app

• High logistics cost, crowded market makes goods e-commerce less attractive, focus on services
• Talking to very strategic investors who can help it figure out right O2O formula

POST its acquisition of Groupon Malaysia, KFit Group will discontinue the e-commerce services currently offered by Groupon Malaysia to focus on driving sales for services based businesses around restaurants, gyms, hotels, beauty and spa.

Specifically, Joel Neoh, founder and chief executive office of KFit, tells DNA that KFit wants to be “the best sales app for local businesses”. Because, at the end of the day, local merchants want sales which drives their profitability. And that’s what KFit aims to deliver for the Groupon Malaysia merchants – sans those who push physical products.

Neoh pinpoints the high logistics cost of e-commerce coupled with buyers expecting free delivery which has made e-commerce “a very expensive business to run with low margins”, hence KFit’s decision to not invest here.

“It’s not part of our road map. Investing in e-commerce just doesn't make sense and on top of that there are already so many companies in the space,” he points out.

Which is why, in its services niche, KFit is trying to innovate around creating a more convenient experience for customers in delivering them to its merchants via Fave.

A pilot, involving around 100 merchants, will soon be run where consumers will be able to pay through an app (or the Fave app) for merchant bills. “The merchant does not need a POS here or make any investments, with the bill handed to the customer by the staff and where payment is made through the app,” explains Neoh.

And while it’s an accepted fact that merchants still need to offer hefty discounts to draw customers Neoh has seen how offering high convenience services has brought about a lower discount model with merchants keeping as much as 80% to 85% of the value while offering discounts of between 10% to 15% to draw consumers to their outlets.

“I have seen the needle move in Japan and China, where, when you make it more convenient for customers, a low level discount model works,” he says. The pilot Fave is running soon in Malaysia hopes to prove this.

“We know the daily deal model still works but want to balance it with a convenience based low discount model as well,” explains Neoh, describing it as a hybrid value proposition.

Further acquisitions & very strategic investor

Having made two Groupon unit acquisitions in Southeast Asia (SEA), and with Singapore being the only other country in the region left with Groupon operations, it would be only logical to ask if KFit Group would be looking at acquiring Singapore as well.

But Neoh says the focus is very much on executing Indonesia and Malaysia well. “We have limited bandwidth and want to focus operationally on doing well in Malaysia and Indonesia. We have not got to the point of considering Singapore.”

And while KFit Group is always open to acquisitions, Neoh explains that it must be where the acquisition will help them accelerate building a full stack O2O bricks to clicks platform.

On the funding front, KFit Group still has funds from its last round of US$3.2 million  raised in July 2015 he says with the focus now not about the money but on finding an investor with the right fit.

“We are talking to very strategic investors who can work with us to figure it out,’ he says, referring to the O2O (offline to online) model that Neoh feels will be the future of commerce in Southeast Asia.

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