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I wrote a post a while ago, arguing that it will be impossible (in the case of China) for that many daily deal sites to survive, forcing a new group buying model based on customer loyalty to emerge. In Korea, there are around 600 daily deal sites and of course they too will face the same pressures. But now, Spoqa, a Korean start-up is aiming to solve the problem of one-off deals that potentially hurt the merchants.

Richard Choi, CEO and co-founder of Spoqa explains that “there are a lot of problems with social commerce right now. A study showed that 42% of Groupon restaurant deals were unprofitable, so we want to solve that problem.” Instead of one-off deals that offer deep discounts where customers are unlikely to come back, Spoqa is trying to generate repeat business.

So how does it work? Firstly, when a user buys something from a Spoqa partner merchant like pizza or shoes, they use their Spoqa mobile app to collect points. After purchasing, users can choose to tell their friends what they bought and where they bought it through a Foursquare-like location based service, which pushes the information to their social networks like Facebook and Twitter. If their friends also go and buy something from the same store, both the friend and the original buyer will collect points, forming a pyramid-like referral points system, allowing people to become a ‘brand ambassador’. The points can be converted to cash to eventually to buy real items, a bit like a frequent flyer program. Points can only be collected from one degree of separation from a buyer.

Richard says “a genuine social commerce system means whenever you buy something, it affects your friends buying decisions. We added in some gamification elements, such as having to come in a certain period of hours or days to collect the points because for example if you buy something and I buy something a year later, it is unfair for the store. If you a power Twitter user and you tweet out that you’ve had an awesome soup at a local restaurant, resulting in many more people buying soup, the restaurant can make a lot more sales quicker. This gives value to the merchant by getting repeat customers and getting their friends to go to the store.” Koreans are a coffee fanatic country. Seoul itself is saturated with great cafes. Richard sees Spoqa as a great way for coffee shops to differentiate themselves and attract repeat and new customers by offering this social recommendation engine that gives everyone benefits.

Spoqa plans to turn this into an open platform where merchants can self-upload deals and select how much discount they want to give out. Initially the business model will be freemium but with the aim of monetizing valuable user purchase data that is connected to their social networks. Although still in testing phase, Spoqa has already been making deals and the response from merchants is favourable where “merchants are sick of giving away 50% group-buying discounts and not getting repeat customers.”

Richard jokes that “We want Spoqa to become so strong that airlines will use it for their customer referral program.”