Why did a Spanish Groupon co-founder’s beauty salon aggregator go into bankruptcy
The editorial staff of vc.ru has interviewed a former Blissbooker’s employee Vadim Moiseev, who told more about the reasons that led to bankruptcy of the company founded by Groupon’s co-founder Boris Hageney. Due to systemic errors and uncontrolled marketing campaign, the service has spent the budget and could not raise funds again. As a result, Hageney left to the US, and the company remained owing money to the former employees and they are going to demand it in a court case.
Groupon co-founder Boris Hageney launched a Spanish aggregator for Blissbooker beauty salons in 2014. He noted that Groupon’s audience most actively uses discounts in health and beauty segment, and that it is often inconvenient for people to buy coupons at Groupon: first they had to pay for them, and then contact with the service provider and schedule the time to visit.
He offered an alternative. Users could find a beauty salon at the platform, select a service, schedule a day, pay for it, and then visit the salon and just use the service. The company charged a fee for each transaction, and offered salons to buy a premium account, for example, to respond to feedbacks and questions from customers.
By September 2015, the company provided services in France, Portugal, Spain and Italy, and Hageney decided to enter the Russian market. Small staff of sellers was engaged in Moscow, and they concluded contracts with beauty salons. Vadim Moiseev lived and worked in Barcelona. He joined the company as an operation agent – his duties included uploading information about beauty salons in the platform database.
The first contracts were concluded even before he joined the company. The launch of the website in Russia was constantly delayed. Developers explained it by difficulties with cash transactions due to differences in the currency rate. However, sales managers continued to conclude contracts with Moscow beauty salons. “They started calling to salons right from the center (of the city). I did not understand Moscow, but I found it strange for people in the center of Moscow to look for a beauty salon through some app. But it was a decision of Boris, so it was not subject to discussions”, — Moiseev tells.
By November, he introduced a hundred of salons to the database, and the Russian branch had the biggest launch in the platform history. But uploading the information about Russian companies, Moiseev has found that they offer too many types of services, and it is inconvenient for users to navigate the website.
“In Europe, the salons have very narrow specialization: some offer manicures only (just 10-15 types of manicure). Others offer haircuts. But the average Russian beauty salon offers 100 – 400 services, and we had to provide the information about each. As a result, the website was like the Bible – you have to scroll through 400 services to find the right one”, — Moiseev clarifies.
He applied to Hageney with an offer to improve the interface, but both he and other managers decided to copy the competitors’ design. At that time Moiseev had insufficient authorities to challenge this decision.
The business has attracted customers only through online channels. Hageney did not believe in offline marketing: so all the ads were posted in Google, Facebook, and via paid publications with bloggers.
“Remunerations of bloggers were astronomical, — Moiseev tells. — A couple of months before dismissal, I learned that we paid several hundred euros per publication to some bloggers. At that time, the service still had enough money to pay them generous wages”.
Whereas, the company could not affect the quality and track the effect of publications. According to Moiseev, some bloggers made mistakes even in Blissbooker’s title. “Our first marketing specialist was not very proficient in the mechanism. He was not familiar with details of SEO, did not know how to maximize traffic from the blogger’s page, and so on. And promotion channels were also straightforward”.
Everything changed when another marketing specialist joined the company, previously engaged in Sony Xperia promotion. “We realized later he was hired for the status. He offered another promotion strategy – to issue coupons to users”.
The service began organizing mass e-mail subscriptions by sending promotional codes with discounts to subscribers. However, the system was not configured well, and customers from France could send used coupons to friends from Spain, and they could activate it again.
“Yes, we received many reservations, and that was nice. There was some activity, but in fact, how could we make money with this? The example: we provide a person with €35, he buys a service which costs €15. The remaining €20 are deposited to his account. He could visit beauty salons just by using coupons and save “the change”, and then buy a service which costs €200. Who paid for such services in this case?”, — Vadim Moiseev tells.
In just a few months, the company has lost a lot of money, and the number of reservations has exceeded several thousand. “Boris had to show investors that the model is feasible, and that people are ready to visit the website make reservations. But investors were not interested in it: everyone understood that it was unprofitable. But Boris wanted to show them that we can work in any region. It was like – we have conquered Europe, opened the branch in Russia, and are now ready to work in Turkey”, — a former Blissbooker’s employee says.
According to Moiseev, despite the large number of salons that have joined the system, there were almost no reservations in the first month in Russia. Partly because of the service inconvenience, partly because of ineffective promotion. A group in Vkontakte social network was opened, a new girl from Russia started working – half of working hours she was engaged in data entry, and the other half – in SMM”.
By December 2015, Moiseev completely switched to customer support. At that time he realized that the company’s business model supposes income not from the reservation processing fee, but from additional sale of special software for customer accounting, integrated into Blissbooker platform.
The fee in Russia was lower than the competitors’ one (theirs was up to 50% of the transaction). In Europe, the competitors’ order processing fee was about the same level as Blissbooker’s, but they offered their software for free, which was not beneficial for the company’s business.
“The majority of salons used free of charge model, because our software was not needed to anyone: all of them used magazines the same old way. And Boris had an idea to make people forget about paper”, — Moiseev recalls.
After switching to a new post, he found that many contracts with beauty salons were concluded negligently, and sales representatives have not paid enough attention to the service presentation. So a few months later, some company owners forgot both about the amount of fees they had to pay, and also that they generally concluded contracts with Blissbooker.
Due to high spending on promotional codes and low level of earnings, the management closed the Turkish branch, and in April 2016 – the Russian one as well, which had worked in the background mode until then. In February 2016, Hageney decided to dismiss about 40 people — a bit less than half of the employees, in parallel continuing to search for new investors.
“First of all, sales managers were dismissed, because over three thousand beauty salons were registered in the system at that point – more than any competitor had. Boris thought it was also important for investors”, — Moiseev recalls. After dismissal of the sellers, the marketing department was dismissed, the company ceased using coupons and reduced discount amount. As a result, the number of customers has dramatically reduced.
If previously we celebrated thousands of reservations, volumes have 5-10 times reduced by the summer
The most popular service in terms of the service presence was Barcelona. According to Moiseev, this was due to the fact that this city had the most employees, who advised the service to their friends.
“We had an internal competition – who attracts the most customers by using own personal promotional code. A winner received iPhone or iPad. And it was enough to attract 10-20 customers to win. I was not personally involved in this campaign, but one employee has won twice”, —Moiseev recalls.
Furthermore, Hageney has introduced an additional incentive program. When the company ceased using its own discounts and promotional codes, he offered the employees to call to beauty salons and get discounts from them. An employee received a great reward for each salon that reduced the price by 20% for five services.
According to Moiseev, at that time, many employees managed to double their salary. “It was easy. We promised new customers to the salons. We called them and said, “Let you discount your services yourself, and then you move to the first page at our website”. – And they gave consent”.
Very many mistakes in the company were due to technical issues of the service. Hageney told employees that it had become a key factor in the death of the service. After the influx of the audience due to the introduction of coupons, servers did not have time to process requests from customers.
And developers have decided to transfer the system to new servers. However, it was found that they had to rewrite almost all the code from scratch for this purpose. “It was just one big problem with programmers. While everyone came to work at 9:00 and left at 19:00, the developers came at 10:00 and left at 18:00. And they explained it by the fact that after 18:00, their concentration dropped and they could make mistakes in the code. And it is much more difficult to correct the code than to write it correctly right away”, — Moiseev recalls.
However, the code contained errors and omissions. For example, a person could create an account in the service with any e-mail address with no need to confirm it. “«You could randomly enter any e-mail address, and the system accepted you. And people created thousands of fake accounts, using the same coupon several times. Besides, there were no service mobile app for a long time”, — a former Blissbooker’s employee says.
At that time, Moiseev was promoted and was engaged in partners support. “I noticed that beauty salons frequent complained of incorrect mutual settlements. It turned out that our people just did not know how to issue invoices, and sent them with mistakes. Wrong amount were sent and transferred to beauty salons”.
They believed that they could always make a return. My manager has correctly described this situation: we were deeply engaged in correcting our own mistakes than in creating something important for the company. — Vadim Moiseev
By May 2016, Hageney found the money, but it was not sufficient to finance the company’s operations. The management has decided to leave only key employees. “I had five subordinates at that time. They told me and other managers – go for a lunch. When we returned, we saw empty tables, and all subordinates were fired. About 20 people remained. Then we had a feeling that the end was near”, — Moiseev recalls.
At that point, Hageney decided to change the company’s business model. Instead of being a platform for beauty salon aggregation, Blissbooker became a service for their promotion. “We performed SEO optimization, created or maintained their pages on Facebook, registered accounts in Google Business and so on. It was really striking that many were not registered in Google Business. For example, you pass by a 5-star spa in Portugal, and there is no information on the Internet about it, because it does not promote itself”, — Vadim Moiseev tells.
The company sold website development service to some salons. “We have introduced huge prices for all services. In June and July 2016, I even felt that not everything is so bad, because one person could easily conclude 10 considerable contracts”.
And people were happy with what they were offered. I.e., we developed a website for some small contractors, and provided promotion to the other large ones. It seemed deception to me because I added information about a company to various electronic bulletin boards, where no one comes. — Vadim Moiseev
However, in late July 2016, early in the morning Hageney sent a message to all employees – to quickly arrive at a general meeting. “Then he told us that the company ran out of money, there is no money to pay salaries, and we may not go to work anymore. Everyone was shocked. You work for a month, and at the end they say, “Good bye, we will not pay to you””, — Moiseev recalls.
According to a company’s former employee, Hageney really tried to find money and save the business. But investors did not want to listen to him. “He had a personal conversation with each of us. And in a conversation with me he said that he will pay, but a bit later. That at first he will negotiate with various companies on the sale of the service in parts: a platform to someone, a customer database to someone, a partner database to someone and so on”.
According to Moiseev, the employer still owes him about four thousand Euros. This amount includes a monthly salary, the allowance for the employment contract termination and leave allowance. The first time Hageney keep employees aware of the company’s fate. In August, he was going to sell the platform to a German company, moreover doing it so that employees did not lose their job.
This option suited Moiseev: he could ask a new employer to increase wages. However, something went wrong. “Through a close friend of Hageney I found out that we shared our database with this company, and as a result they have cheated us – they started to visit our customers and offer them their service, saying that Blissbooker was closed and would no longer work with them”.
According to Moiseev, the company employed one of Hageney’s friends who continued to bill customers for services rendered even after the business closing. Hageney began to hide, and Moiseev began to put pressure on him in order to return money.
“At one point he said that he negotiated with our competitors – the Italian Vaniday company – on the database sale. And he promised me that if he could sell it, he would return money to me and other employees”, — Moiseev tells.
Finally, Hageney completely stopped communicating with Moiseev. Former Blissbooker employees heard various rumors – Hageney told to one employee that he had allegedly filed for the official company bankruptcy.
However, in November 2016, Moiseev saw that by opening the Italian Blissbooker’s website, you are redirected to a competitor’s (Vaniday’s) website. “I decided that the company was sold and wrote a message to Boris, greeted him and asked, when I could get my money. But he refused to return them. He said that in fact the deal fell through. But in December 2016, a friend of Boris sent me an article, which really contained the fact of the service sale, but the same day I was told that Blissbooker was subjected to bankruptcy”, — Moiseev tells.
After that, Hageney left Spain to the United States, where he became a director of Global Founders Capital fund. Besides, a monthly salary, Blissbooker owns me a monthly unemployment benefit. “A week before the dismissal, I learned that I have 21 days off. When I went to the unemployment office, I was told to come back when I spend them, because this time is paid by the company”.
“I came back in 21 day, and they told me: “You’re late, you did not have days off according to the documents”. So I lost a monthly allowance from the state. It turned out that Boris deleted my days off to reduce the company’s costs. But he promised that he would pay me”, — Moiseev recalls.
“There is no news from Boris at the moment, but me and former employees have filed a lawsuit against Blissbooker to recover all our money. The lawyer said that the process would last for about two years”, — Moiseev concludes.