50 group buying sites close in 2012 as industry stagnates

by Marketing ON 27 February 2013

After clocking a phenomenal 650% year-on-year growth in 2011, the group buying industry’s fortunes collapsed in 2012 registering an increase of only 1.4% year on year.

The rapid halt in growth saw the number of businesses operating in the sector decline from 80 at its peak to around 30 today. Technology analyst Telsyte blames changes in market conditions and aggressive consolidation for the exit of many of the businesses.

However, as the industry consolidates clear winners are emerging, with the top five sites – Groupon, Scoopon, LivingSocial, Cudo, and OurDeal – taking the bulk of the $504 million spent on deals over the year.

Collectively the top five achieved 9% year-on-year growth for the year, while leaders of the pack Groupon and Scoopon saw over 40% year-on-year growth combined.

Despite the modest growth level, the industry is showing signs of rebounding with the past two quarters showing an increase after three consecutive quarters of decline, Telsyte’s senior research manager, Sam Yip, says.

“Industry growth has come from increased mobile transactions, new merchants, increased consumer satisfaction due to better quality customer service and growing consumer confidence in the main sites,” Yip says.

“Increased competition is expected to continue and create pressure on smaller group buying sites.”

The fastest growing segments in the market were retail product sales, and local deals (deals that focus on a certain local geography).

In quarter four 2012, Australians spent more than $130 million on group buying, down from $144.2 million during the same period in 2011.

Telsyte expects the industry to remain steady at around $500 million in 2013 with industry consolidation likely to continue for another 12 months. Groupon, Scoopon, LivingSocial, Cudo and OurDeal are expected to continue to take the lion’s share of the revenue.

Group buying market flat, propped up by travel deals

by Marketing ON 12 November 2012

The group buying market stabilised in quarter three of the year, arresting the momentum of three consecutive quarters of decline, but revenue is still well down on the same time last year.

According to analysis from Telsyte, online group buying took in $117 million in revenue between July and September, putting the quarter on par with the previous period.

However, in quarter three last year the sector, which was still experiencing phenomenal growth at the time, raked in $158.5 million and grew by 28%.

The fortunes of the industry have been in decline since that point, with quarter-on-quarter declines in revenue, including a drop of 14% in the first quarter of the year and 5% in quarter two, occurring in each quarter since. The group buying business model has also been experienced difficulties overseas, with market leader Groupon reporting losses throughout the year.

A surge in travel deals was the driving force behind the stabilisation, senior research manager at the insights firm, Sam Yip, says.

Travel deals accounted for 30% of revenue in quarter three, an increase of 60% on the previous quarter, making it the most popular category for the period.

“Consumers are increasingly comfortable paying for higher value deals from group buying sites,” Yip says.

According to Telsyte research, the industry has put an end to the past three quarters of decline, indicating that the market stabilised in 2012. Telsyte forecasts the industry will exceed $530 million in revenue in 2012 – a 7% increase over 2011.

“Group buying is here to stay and it is part of the natural evolution of the local ecommerce landscape,” Yip adds. “Consumers continue to purchase through group buying sites and are becoming more comfortable doing bigger transactions through these sites.”

The top nine group buying sites for quarter three were Groupon, Scoopon, LivingSocial, Cudo, Spreets, Deals.com.au, Ourdeal, Ouffer, and GrabOne. These sites generated over 95% of the industry’s total revenue.

Group buying haemorrhage shows signs of subsiding

by Marketing ON 4 September 2012

Following two quarters of revenue decline, the Australian online group buying market has begun to stabilise, according to technology analyst firm Telsyte.

The analyst’s ‘Online Group Buying Report’ shows the group buying industry generated $117 million in quarter two 2012, a 5% decline from the previous quarter indicating signs the industry is stabilising following two quarters of double digit decline.

The shift from local service-based type deals, like food, dining and health deals, to national deals focusing on travel and physical products over the past 18 months, has also started to reverse. National deals increased from a low base to comprise 51% of the market by quarter one 2012, but in quarter two they decreased to 45%.

“Group buying sites have seen the success of selling product deals through their sites, but this has come at the cost of losing focus on local deals, the very type of deal that the group buying industry was established on,” comments Telsyte’s senior research manager Sam Yip.

“This should stabilise the market and set it up for strong growth coming into the second half of the year with the holiday season.”

The future is looking bright again for group buying according to Telsyte, which counts many of the group buying firms as its clients. It forecasts the industry will exceed $600 million in revenue in 2012 – a 20% increase over 2011 – due to an expected strong second half of the year.

The analyst expects the growth to come from seasonal offers, in particular technology products and accessories leading into the holiday season.

The top eight group buying sites for quarter two were Groupon, Scoopon, LivingSocial, Cudo, Spreets, Deals.com.au, Ourdeal, and Ouffer. These sites continue to generate more than 90% of the total industry revenue.

Group buying slackens forcing operators to innovate

by Marketing ON 22 May 2012

After unprecedented growth over the past two years, the Australian group buying market recorded its second straight quarter of decline, dropping by 14% compared to the previous quarter.

While retail seasonality, reduction in overall number of market participants and reduction in the average price of deals may have impacted on the drop, analysts Telsyte predict growth is likely to continue to slow down unless the industry starts to innovate.

The industry generated $123.5 million in quarter one of 2012, a 14% quarter on quarter decrease, but an increase of 72% on the same period last year, when the industry was still in its infancy.

According to senior research manager at Telsyte, Sam Yip, group buying companies need to innovate to refresh their offer in order to arrest the decline that has started to set in. Yip says the need for better customer segmentation and deal targeting is critical to the continual growth of the industry, as the traditional model of sending emails reaches its peak giving consumers a feeling of ‘deal overload’.

“I don’t think it’s about consumers losing interest,” Yip says. “It’s more about the sites and how they market to the consumers.” Yip points three areas where group buying sites can innovate – deal targeting, customer loyalty and mobile.

“In terms of innovation it’s around the site side of things… innovation around customer segmentation, customer data, targeted deals and innovation around generating loyalty as well. We haven’t really seen any of the sites push to get consumers loyal to their own sites, whether by a point system or by specific deals. Thirdly, it’s around the technology, especially around mobile which is a massive opportunity based on mobile penetration at the moment.”

A number of the group buying sites, including Groupon, LivingSocial and Spreets have launched their own apps, but none have included the functionality to offer deals based on consumers’ current location in real time. Telsyte believes there is an unprecedented opportunity for location-based group buying offers as smartphone penetration has already exceeded half the Australian population.

However, not all members of the industry believe it should be the one to champion mobile coupons and location-based deals. CEO of Spreets, Dean McEvoy, told Marketing that location-based, real time deals had been left out of the company’s recent app launch intentionally, with the momentum for this type of service sitting in Facebook’s or Google’s court. In the US, Groupon has been struggling to implement its location-based service, Groupon Now, which has seen a decline in success since its launch.

Nevertheless, Yip believes the approach, which has been dubbed ‘SoLoMo’, has merit for the group buying business model. “The ability to integrate mobile social networking with deals, offer location-based deals, and allow merchants to push deals immediately to customers within their vicinity will be the pillars of growth in the next two years,” he says.

“When it comes to mobile it’s not just around innovation with the consumers, the applications they use and how they buy, it’s about how to get merchants using mobile to push deals, location based services, real-time deals.”

Telsyte expects the group buying market to exceed $600 million in calendar year 2012 and continue growing towards a $1 billion industry by 2016. In 24 months, the industry has gone from concept to becoming a key contributor to the Australian ecommerce industry with nearly $690 million worth of goods and services purchased through 14.5 million vouchers sold to date.

The top eight group buying sites for quarter one 2012 were Groupon, Scoopon, LivingSocial, Spreets, Cudo, Deals.com.au, Ourdeal, and Ouffer, which combined generate more than 90% of total industry revenue.

Group buying’s potential remains unfulfilled + infographic

by Chris Byrne ON 15 February 2012

The juggernaut group buying sector exceeded revenue expectation in 2011 and posted a phenomenal 650% year-on-year growth. Its ability to tap into both the power of the ‘crowd’ and a post-GFC consumer trend toward thrift has proven to be a lucrative combination for the 100-odd businesses that now populate the young industry.

It seems getting consumers to open their wallets in 2011 was as simple as offering a hefty discount and making them feel clever for saving 80% on 100% of the money they wouldn’t have spent to begin with.

But while group buying is nothing less than a runaway success – according to Telsyte, Groupon Australia alone grew 1,356% in the second quarter of last year – it is not yet living up to its promise. It’s the talented youngster, still to knuckle down and realise its potential. And if it’s not careful, the bubble may burst; sales may already be weakening with a 9% drop in the market over the last quarter of the year.

According to data from research group TNS, only 22 percent of Australians are current users of group buying sites, and a further 30% are yet to hear of or understand the concept, telling us there are opportunities to both encourage more repeat customers and recruit new users.

The most prolific users are 35-49 year-old females. Males, Gen Y (particularly younger) and Baby Boomers have not joined the stampede to the same extent.

Engagement among men who have signed up is significantly lower than females with more having unsubscribed from the daily emails and more claiming to be bored with the type of deals on offer. This stands to reason, with the deals dominated by categories which traditionally fall into the female leisure shopping domain.

And the daily emails these businesses send to their subscribers polarise their audience – half (49 percent) find the deals to lack personal relevance, while the rest (43 percent) look forward to receiving them.

While the sector has been phenomenally successful so far, it is yet to put into practice basic elements of targeting via email or mobile in Australia. Aside from niche operators, group buying sites make little effort to send relevant deals to their customers, flinging bikini wax deals at men and family holiday offers at singles left, right and centre. The market operates in a deal rather than data-driven manner, bombarding its subscriber base with offers of limited relevance.

Imagine how successful group buying businesses could be if, instead of indiscriminately emailing subscribers, they tailored deals by gender, age, interests, past buying behaviour or even current location. Groupon’s global chief executive, Andrew Mason, appears to be taking this commonly held customer complaint seriously. Upon releasing the company’s earnings to investors, which detailed a $42.7 million loss for the company to end 2011, he hinted at plans to deliver more targeted deals.

The company, which already delivers location-aware deals through its Groupon Now app in 31 markets, intends to invest in features, which according to Mason, will allow it to respond to requests to “stop sending me pole-dancing lessons.”

A spokesperson for Scoopon also confirmed that they’re looking to introduce location-based deals to their mobile app in 2012.

With analysts tipping that many in the crowded market will fold, fulfilment of group buying’s potential will come to those who deliver deals that their subscribers want, every time, when and where they want them.

INFOGRAPHIC: Group buying Australian market wrap 2011.

Click to open larger version.