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.

Your Facebook Offers cheat sheet

by Simon Dell ON 20 April 2012

After nearly 18 months of promise and false dawns, Facebook Offers (originally developed as Facebook Deals) finally rolled out worldwide for business timelines everywhere this week. Here’s a quick cheat sheet of important facts for you to remember when organising your first Facebook Offer:

Offers only works on selected timelines…

…at the moment. It will expand as Facebook irons out any issues. And deleting an offer may not necessarily void the offer. So make sure you get your terms and conditions right. See below for that!

Strong headlines are important

You need to attract their attention, so make sure its clear what the offer is. You don’t have much space so make it count. It goes without saying that the image associated with the offer is equally important. Square images 90 pixels by 90 pixels work best.

Limit the number of offers

If they claim an offer, they might not use it, so you need to bear that in mind too. There’s no obligation to redeem it. So think about how many you limit to. You’ll also understand through trial and error how good a deal needs to be in order to generate a response. Facebook suggests at least 20% off your normal price.

Remember the Ts and Cs

If there are some restrictions on the offer, make sure you add these in here too. Don’t get caught out with competition and promotion laws that vary from state to state in Australia. If in doubt, ask an expert.

The offer is available on your mobile phone, too

You can see and claim the offer via the mobile version of your business page. So if you’re a retail business and a customer claims this offer in your shop, not only can they claim the offer right away, it will automatically share this action with all their friends. That’s real social sharing; the offer appears on their timeline instantly and all their friends can then also claim that offer. A good offer can easily go viral with just a gentle push.

You can link an advert right back to your offer

When you set up a Facebook advert, you can link it to both your page or to a particular post: in this case, the Facebook Offer post.

Pin your Offer

Your Facebook Offer can be pinned to the top of your page so everyone sees it when they arrive.

Attracting and growing your fan base is now as important as ever; Facebook Offers give you the opportunity to develop Groupon-style deals direct to your customers. And for those non-retail businesses, utilising Facebook Offers for training and resources will be just as important.

Westfield and Groupon partner to drive retailer sales

by Marketing ON 29 February 2012

Two giants in their fields, Westfield and Groupon, have joined forces to bring shoppers deals from thousands of retailers via a group buying model.

‘Groupon Powered by Westfield’ will send subscribers weekly deals that can be purchased online or via Groupon’s or Westfield’s mobile apps. While the apps will allow users to purchase the deals from anywhere, they do not incorporate location-aware targetting which would enable deals to be served as a user enters a Westfield centre.

Launched today, the new group buying deals service coincides with Westfield.com.au’s revamped ‘deals and sales hub’ and will allow retailers in its centres to list products with no upfront investment.

Director of marketing at Westfield, John Batistich, says the new service aims to drive more shoppers to Westfield.com.au and into Westfield shopping centres.

“The partnership with Groupon will enable shoppers to purchase deals from Westfield’s best-known retailers and brands, with the confidence of knowing they are dealing with Groupon, the world’s largest group buying site,” Batistich says.

CEO of Groupon Australia, Tobias Teuber says, “The Westfield partnership will open the group buying deals market to a whole new world of highly sought-after products and services from trusted brands and retailers that Australians know and love.”

Australians spent $498 million on group buying in 2011 (see our group buying infographic for last year’s market wrap) and are expected to spend over $1 billion a year by 2015.

Senior research manager at Telsyte, Sam Yip, warns that 2012 will be a year of consolidation for the group buying industry and that some in the market will fold.

“With Westfield and Groupon you’ve got two giants, one of the biggest group buying sites in Australia partnering up with the biggest retail giant. [This] allows Westfield’s retailers and brands to reach a highly engaged consumer base ready to spend online,” Yips says.

Retailers on board for the launch include Hoyts, Escape Travel, Boost Juice, Salsa’s Fresh Mex, Ed Harry, Ella Rouge Beauty, Queenspark, Hairhouse Warehouse and Westfield Stylist and Napoleon Perdis launch deal.

Commenting on Hoyts’ involvement in the initiative, their chief commercial and development officer, Matthew Liebmann, says “Having Westfield as a partner in this service was a key motivator for Hoyts. Under this partnership, Westfield, along with Groupon, will be involved from the initial online sale through to the fulfilment of the offer at a Hoyts Cinema within their shopping centres.

“This further entrenches Hoyts’ relationship with Westfield, while building trust in the service with our customers.

To celebrate the launch, Westfield and Groupon are hosting a $1 group styling session at Westfield Sydney for the first 100 shoppers who register for the deal.

Groupon launches VIP program to improve retention

by Marketing ON 21 February 2012

In a bid to improve customer retention, and get a greater hold on serial cheapskates, group buying giant Groupon is testing a loyalty program in the US called Groupon VIP.

Last Wednesday the company sent an email to select members of its database to invite them to trial the VIP service for a three month period, the Chicago Tribune reports.

The program, which will cost $30 per year after the trial period expires, gives members early access to deals, the ability to buy previously sold out or closed deals and the luxury of anytime refunds, allowing members to swap unwanted or expired deals for Groupon dollars.

LivingSocial, who ranked second in terms of market share in Australia last year (see our group buying infographic for a 2011 market wrap), has been testing a similar service in the US since November.

Dubbed LivingSocial Plus, the loyalty program costs $20 per month and comes with similar features to Groupon VIP, but with the added benefits of VIP events and $5 LivingSocial dollars awarded per month.

Senior research manager at Telsyte, Sam Yip, says the loyalty program is a smart move from Groupon.

“Last year was all about acquisition for the large companies who spent a lot of money trying to get people to their site,” Yip says.

“This year will be all about loyalty, recognition and providing targeted deals to give consumers more control.

“Groupon VIP addresses all these points and is a compelling reason to stay with Groupon.”

Yip also comments that offering customers returns for unused or expired deals is generous on the part of the company, which is dependent on its merchants to supply the services it sells.

Yesterday, competitor site Scoopon who ran a deal for Air Australia in July, forked out $1 million to reimburse stranded customers after the airline collapsed.

Groupon also announced more social features and personalisation options, the Tribune reports, including allowing members to save multiple locations, such as home or workplace, and thumbs up and thumbs down buttons so the service can start collecting information on the types of deals users like.

Groupon’s chief executive, Andrew Mason, reportedly told investors at a conference in California last week, that personalised deals will roll out to non-US subscribers later this quarter.

According to Mason, the tweaks will “help to remove some of the worst infractions in our deal selection for users that don’t want to receive certain types of deals”.

Mason also hinted at more features to share deals via social media, “We have not done nearly as much as we can or will to leverage social. There’s sharing that happens naturally, but there’s not a lot of functionality that you would look at built into Groupon and say, ‘That feels like a very social feature.’ So you can expect more of that from us.”

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.

Groupon reports $42.7m loss, turns focus to mobile

by Marketing ON 10 February 2012

In its first earnings report as a public company, group buying multinational Groupon recorded a $42.7 million loss for the three months to 31 December 2011.

The company, which made headlines last year as the largest technology IPO since Google, also cut its marketing spend in the quarter, by nearly $50 million compared to the same period in 2010.

In the announcement of its fourth quarter results, Groupon reported a 194% year-on-year revenue increase, up to $506.5 million, and a 275% year-on-year increase in active user numbers to put their member base up to over 33 million.

In 2012, the group buying giant anticipates revenue upwards of $510 million and plans to introduce features to make the deals it sends to customers more personalised as well as push its mobile feature, Groupon Now.

Worldwide, more than 26 million people have downloaded Groupon Now’s mobile app, which offers deals based on a person’s location, to their smartphone. Launched six months ago, the app is available in 31 markets and served deals from nearly 20,000 merchant partners in North America in 2011.

Groupon, which was valued at nearly $13 billion when it floated last year, made a larger loss in quarter four of 2010 – $378.6 million. The company attributed the net loss to the costs associated with its new international operations.

Its chief executive, Andrew Mason, says, “We will continue to invest in new services and tools that help our merchant partners be more successful and drive local commerce around the world.”

According to digital news site, AllThingsD, Mason also hinted at new features coming in the first quarter that would allow the company to send more targeted deals, based on gender, interests and past buying behaviour, rather than simply location.

He said: “It allows us to say, ‘Please stop sending me pole-dancing lessons’. That’s been a much-requested feature.”

Groupon cut its marketing spend to $156,461 in the quarter, down from $200,927 in the same period of 2010.

Bumper year ends in decline for group buying

by Marketing ON 6 February 2012

The juggernaut group buying sector saw seven-fold growth in 2011, according to figures out today from tech research company Telsyte, but there was a decline towards the end of the year as the Christmas period disrupted normal trading conditions.

The sector logged a phenomenal year on year growth rate of 650% for 2011, but talk of a slow down in the group buying trend became reality with a 9% decline in sales for the last quarter of the year.

Senior research manager at Telsyte Sam Yip puts the decline down to less deals being served in December and a disruption of buyers’ routines in the lead up to and during the Christmas break.

“December and January are slow months for group buying so we’ve seen a decline in growth,” Yip says.

“There were less deals released during December as sites held back on the number of deals over that period… if they put a deal out there and it doesn’t do well the merchants get upset.”

The fourth quarter saw a shift in the type of deals sold, from the traditionally well performing health and beauty and restaurant and dining categories towards travel and physical products.

Physical products such as jewellery, electronics, or clothing, experienced the highest growth in the quarter to now account for 30% of the total market.

“Increased focus on physical product sales in group buying will change the face of the industry and introduce competition between deal of the day and grocery and discount online department stores,” Yip says.

Yip acknowledges that the growth in sales of physical products may have also been due to the increase in gift buying for Christmas.

Since commencing in 2010 group buying has grown to become a half a billion dollar local industry with some 5000 deals published and an average of 1 million vouchers sold each month.

The group buying sector exceeded Telsyte’s expectations in 2011, surpassing the forecast sales of $400 million to reach $498 million for the year.

Telsyte expects the group buying market to grow an additional 30% in 2012, exceeding $600 million and reaching $1 billion no later than 2015.

Quarter four’s results show the continued rise of the multinational group buying sites like LivingSocial and Groupon. While Scoopon lead in terms of market share for 2011, LivingSocial was the leader in quarter four and Groupon came out on top in December.

Yip says that during 2011 group buying firms focussed a lot of their energy on customer acquisition. This year, he believes the focus will switch to loyalty schemes and mobile.

“In 2012 loyalty programs and targeted deals will continue to drive sales, while leading sites will enhance their mobile commerce strategies and expand their offerings” Yip says.

“In the US, Groupon are expecting 50% of deals to be done by mobile next year. I’d expect all the large players to improve their apps this year, starting with the multinationals who will be able to roll out their overseas apps.”

Yip also expects the sector’s email communication to become more targeted next year as the businesses install departments specialising in categories and product resourcing specialists.

Co-founder of Scoopon, Gabby Leibovich, says the multinational group buying entrants have been aggressive in their marketing spend and passed on this expense to their clients with high commissions and complicated contracts.

“It’s a true David versus Goliath battle,” Leibovich says. “The international entrants have come in and exerted their weight with massive spend on marketing campaigns and recruited an army of hundreds to try and buy their way into the Australian market.

“We on the other hand have always let our deals do the talking, and despite little marketing effort have built the country’s strongest and most loyal membership base of over 1.8 million members who have signed up simply because they are genuinely interested in what we have to offer.”

The top eight group buying sites for 2011 were Scoopon, LivingSocial, Spreets, Cudo, Groupon, OurDeal, Deals.com.au, and Ouffer, which, combined, accounted for 95% of market revenue.

Woolies enters the daily deals fray

by Marketing ON 24 January 2012

Woolworths has thrown its hat into the daily deals ring with the soft launch of its own discount site, Door Buster, last week.

The site follows a Catch of the Day style model but offers both time-limited deals and clearance deals on remnant stock that are available until sold out.

A point of differentiation against other daily deal sites is the promise of next-day delivery, as only products currently in stock are being offered on the site.

According to Telsyte senior research manager, Sam Yip, it’s a smart move to offload excess stock and there are still plenty of opportunities for large bricks and mortar players to enter the market.

“There was a boom of deals, but that’s going to continue. It’s a natural progression for companies like Woolworths. It’s all about providing range, and it makes sense as a promotional channel, and a clearance channel as well,” Yip tells Smart Company.

“If you look at the daily deals sites that are already out there, they’re basically discounting whatever they want, and they’re selling whatever is hot at the time. But for Woolworths, it has significant brand recognition and is playing a different game.

“I don’t think Woolworths is competing directly with the other sites. I think they are just utilising what they have online and are doing something with it.”

Stock on the site sits under four categories: health and beauty, toys, electronics and groceries, but there appears to be a selection of other products such as watches and garden equipment.

Currently there are over 160 products available for purchase as ‘Instant Buys’ that are not subject to a time limit.

In contrast, ‘Mega Deals’ are available for a period of 48 hours before being moved off the site.