When the group-buying market took off in South Africa, entrepreneurs Luke Jedeikin and his partner Mikael Hanan, decided they should look to make their fortunes elsewhere and their start-up, Citymob, started in March 2011, moved from pushing digital discount vouchers to selling carefully chosen and well-designed physical products.
The market became overtraded, says Jedeikin, who is Citymob’s MD. “In pivoting and changing direction we thought apparel was next space because there’s a huge gap in the South African market for proper fashion-based e-commerce sites. But we didn’t want to wage war in the ‘next space’ so we moved into design.”
Based at The Biscuit Mill in Cape Town’s Woodstock, Citymob employs 18 people, including two developers, a large content team of copywriters and designers, a logistics, support and traffic team of four, as well as seven buyers.
The company was launched in its current form in March this year and gradually phased out group deals and coupons. “We now sell curated design products,” Jedeikin explains. The first two months were difficult because the company had no experience in selling products having previously sold digital coupons exclusively.
“We had to understand whether the products we wanted to sell would be viable in the local market and we had to get to grips with logistics. Shipping 900 products a day in the festive season is very different to selling a virtual coupon.”
Jedeikin says another challenge was figuring out how to offer value when moving products rather than vouchers. While group buying relies on discounts, Citymob now relies on “the quality of and imagination in the products we offer”.
Although the company’s database dropped at first, since the change of model it’s seen customers spending far more on average. “Previously the average cart purchase was around R49 and now it’s closer to R450. We expected to see some attrition from people who were only in it for the deals. Our database dropped slightly at first, but we found we were losing as many people as we were gaining, with newcomers willing to spend more.”
Citymob was self-funded from the start, and the company’s main focus was on finding quality deals, particularly when big players like Naspers entered the market with the now-defunct Dealify. Low-cost airline Kulula’s Daddy’s Deals and the South African version of group-buying pioneer Groupon made the market all the more competitive.
“The way we competed with insignificant resources was by becoming obsessed with quality. We learnt how important that was when we managed to sell 1 800 coupons in six hours to a database of 10 000 people. You can get insane conversions with the right deal, and we built metrics around that.”
Jedeikin says the company’s attention remains on customer retention and quality. This explains the website’s eclectic mix of goods, covering everything from bikinis and furniture to lampshades and even an inflatable banana.
“People who know what they want go to a bricks-and-mortar store. We’re the place for when you don’t know what you want, or you’re looking for gifts, or you’re bored at work.”
Citymob targets what Jedeikin calls a “design-minded” audience. “In many ways, our consumers are also our suppliers. That’s not to say they’re necessarily all designers, but often they’re creative. We’re seeing more and more people coming to us with their products.”
While group buying seeks to achieve scale by getting large numbers of takers, Citymob’s curated model tries to sell the bulk of its inventory quickly and make products desirable because they’re limited rather than abundant.
Courier company Berko handles delivery, and Citymob is considering expanding its operation beyond South Africa. As a group-buying site, the company limited its operations to Cape Town, but it now ships nationally and Jedeikin says although Cape Town remains its biggest market, demand from Johannesburg is growing at four times the rate.
Large brands are trying to get their products on the site and potential partners are expressing interest. “We’ve had quite a few bites in recent months, with large players reaching out to us, and we’re completely open to those kinds of conversations. But we’re still ironing out creases and are very much a six-month-old business. Any major partnerships will only be tackled next year.” — (c) 2012 NewsCentral Media
