Groupon to withdraw from Korea in 1st half

By Choi Kyong-ae

Groupon, the U.S. e-commerce company, will discontinue Groupon Korea operations this year as part of a broader streamlining effort, a company official said Tuesday.

"Yesterday, executives from the Groupon headquarters came over to Seoul to deliver the withdrawal plan to its Korean employees," the Groupon Korea official said by telephone.

The parent company is shutting down Groupon Korea to focus on Ticket Monster, another online deals and marketing web site, in the cutthroat Korean market, the official said, asking not to be named.

Groupon announced its plan to buy Ticket Monster for 280 billion won ($260 million) in November to strengthen its presence in the social commerce business. The deal was completed in January with the approval of the Fair Trade Commission.

Back then, Groupon Chief Executive Eric Lefkofsky talked about how Groupon Korea could help Ticket Monster become the No. 1 player in Korea's e-commerce market, according to Groupon Korea.

The anti-trust regulator expects the fast-growing industry to reach 3 trillion won by the end of this year. Increased use of mobile devices is set to further boost demand for social commerce transactions.

The country's three biggest players ― Coupang, Ticket Monster and We Make Price ― separately earned more than half of their revenues from mobile transactions, a Coupang official said by telephone.

Coupang earned more than 60 percent of its revenue in moible transactions last year.

For 2013, the first two companies posted around 1.2 trillion won respectively, followed by We Make Price with less than 1 trillion won, the Coupang official said.

Under the reorganization program, however, there is no job guarantee for Groupon Korea Chief Executive Kim Hong-shik as well as some 200 employees, the official said, adding he is one of the employees.

"It will take several months to complete the process to close down the business entity of Groupon Korea," he said.

The Chicago-based Groupon entered Korea in March 2011 to benefit from the then burgeoning social commerce market in one of the world's most connected countries.

But the Korean market turned out to be tough for the U.S. firm to lead local players specialized in local demands.

Groupon, known for daily deal offers, recently suffered from rising acquisition and marketing costs. Despite a 20-percent jump in revenue to 768.4 million, it reported a net loss of $81.2 million in the fourth quarter, marginal changes from a loss of $81.1 million.

The company has bought companies, including Korean ticket purveyor Ticket Monster, in order to make a stronger push in physical goods sales at discounted prices.

"Merchants offer deals (which largely include coupons and goods) in large volumes and customers are able to buy the deals with unbeatable discounts. We receive commissions for the deals," the Groupon Korea official said.