This article first appeared in The Edge Malaysia Weekly on May 29, 2017 - June 4, 2017

THE short and simple way to describe Fave is probably that it used to be Groupon. The longer story, however, is how Fave was born, and it is a tale that is intricately linked with entrepreneur Joel Neoh.

Neoh was a co-founder of Groupsmore Malaysia, a Groupon-like start-up that was eventually acquired by Groupon in 2011. He was tapped to head Groupon’s Asia-Pacific business, where he remained until 2015, when he left to start fitness platform KFit.

Last year, KFit acquired Groupon’s Malaysia and Singapore business and rebranded it as Fave.

Fave is a multicategory lifestyle platform that enables consumers to find deals across different sectors — such as restaurants, spas, gyms, leisure activities, travel and hotels — all in one app.

Now that all the history is out of the way, the question is, why is Neoh still bullish on a Groupon-like business model that has largely been discredited?

In 2008, Groupon and other similar group-buying platforms exploded all over the world. All of them essentially sold vouchers offering discounts at small businesses, ranging from food and beverage, beauty, leisure experiences and services.

Eventually, cracks in the business model appeared. It was heavily criticised for being unsustainable and offering a bad deal for small businesses that had signed on to offer deals.

The main grouse was that it helped drive a lot of new customers to a business but failed when it came to helping them retain these customers and cultivate loyalty.

Many of the earlier leading platforms had to pivot, either by adding physical goods for sale or offering flash sales deals. Most of them have since disappeared.

As Neoh sees it, the main challenge for Groupon and the like was technology and timing.

For one, Groupon was built on a desktop model. This meant users needed either a desktop or laptop computer to buy a deal and also needed a printer to print out the voucher. Next, they would have to book ahead in order to redeem the deal.

“It was actually quite a hassle to get the discount — that’s why the discounts ranged from 50%, 60%, 70% and so on. Fave is a mobile only experience. You can buy a deal on your desktop, but you will need a mobile device to redeem it. No paper is involved,” says Neoh.

Today, the old desktop transaction model would not work. Most technology platforms would have to be on mobile.

“The growth of consumer mobile usage — that’s one thing Fave is riding on,” says Neoh.

The big shift for Southeast Asia has been mobile, which created a lot of different opportunities for technology companies. Asia-Pacific boasts some of the highest smartphone penetration and social media usage rates in the world. This is why Neoh thinks Fave has a chance where Groupon didn’t.

“The technology or device is always with the consumer so there is more consumer data that businesses can tap into. The user experience is also very different. If the mobile device did not exist, or was not popular, imagine booking a taxi on your laptop. That’s not going to work.

“That’s where we see why Fave would work better than Groupon. It is more convenient because the technology is with us in our pocket. Today, with our phone, we can actually pay right there and then.”

Groupon was very much in the game of helping businesses attract new customers. What about customer retention and loyalty? Well, that would be up to the businesses themselves to make the most of the opportunity.

“I think the difference is that Groupon predominantly focused on pricing, so, big discounts and big deals to help businesses get new customers.

“Where Fave will invest further is in helping business retain customers and create their own membership, so they can retarget different consumer groups who have visited them before,” Neoh says.

Neoh is mindful of the problems that cropped up in the past and hopes to build a more sustainable offline-to-online mobile commerce proposition.

“For consumers, it’s straightforward. As long as you make it easy and rewarding for them, whether it’s a discount or cash back, or they go somewhere and get a free gift when they are recognised. We want to make sure that every experience on Fave is rewarding for the consumer. That helps local businesses grow.”

At the end of the day, Neoh believes it is about balancing convenience and discounts. “The more convenient you make it for consumers, the less of a discount they would expect. Once you make it more convenient, the discounts become the icing on the cake.”

Neoh says Fave is piloting a payment system embedded in the app, which allows consumers to pay their restaurant bill using the app. The incentive is that Fave users using FavePay can get cash back for their next visit.

“It’s something that rewards customers to come back again so it drives more returning customers compared with acquiring new customers,” Neoh says.

“We make it more rewarding to pay with Fave. The reason why businesses and restaurants are willing to give that reward is because they get data and they can reach out to customers again. They are getting more than payment. They are actually turning customers into members they can target again.”

Whatever model it takes, Neoh is certain that local businesses, especially small enterprises, still need a lot of help connecting with consumers online. “All of us have mobile phones, we’re always connected. Businesses today have not been able to leverage that growth of technology.”

Essentially, Fave makes money by taking a cut of the value of transactions it facilitates. Margins range from 5% to 15%, depending on the category and objectives, Neoh says.

The biggest category for Fave is currently restaurants, which contributes about 70% of all transactions. Beauty — which encompasses spas, facials and manicures/pedicures — is another fast-growing category, seeing how 70% of its users are women.

Fuelled by mobile, Neoh has ambitious plans for Fave to grab market share in a space that now has relatively fewer competitors.

A successful Fave, for Neoh, would be a platform that has onboard hundreds of thousands or even a million local businesses around the region with tens of millions of consumers using it daily. “When we get these businesses on the platform, what the consumer would experience is that whatever they want to eat, wherever they want to go, whatever they want to do offline, they can do it on Fave.”

Fave is starting with Southeast Asia’s three key markets — Malaysia, Singapore and Indonesia — before moving into other markets like Vietnam, the Philippines and Thailand over the next 18 months.

“What excites us about Southeast Asia as a mobile commerce company is that mobile payments are on the verge of an explosion in this region in the next three to five years. Our platform will be successful as payments become more successful,” Neoh says.

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