Strongest cut through in daily deal arena

There used to be 80 group buying websites in Australia, but only 30 remain, writes Nina Hendy.

There used to be 80 group buying websites in Australia, but only 30 remain, writes Nina Hendy.

Australia was once plagued by group buying sites, with the number of cut-price deals offered online reaching saturation point.

Fuelled by our love affair for a bargain, and in the thick of the financial crisis, growing numbers of consumers signed up to receive email deals from their favourite discount sites each day.

At the peak, more than 80 group buying sites were operating in Australia. But major consolidation and some failures have resulted in numbers falling to about 30.

Between January and March 2013 Australians spent more than $115 million on group buying sites, according to the latest online group buying study by technology analyst firm Telsyte. This represents a decline of 7 per cent on the same period in 2012, when there were more players in the market.

But the bulk of the consolidation is complete and the group buying sector is expected to generate revenues of about $500 million this year, Telsyte predicts. Nevertheless, there's no doubt the group buying sector has had a few setbacks, with frequent consumer complaints about lengthy delays on deals being fulfilled or redemption terms being too rigid. The industry was also rocked by a major recall announced by in 2011 after a deal for cut-price Havaianas thongs was unable to be fulfilled.

The sector has wised up since then, launching an industry code, with member sites identifiable by a Group Buying Code Member logo listed on their websites and offers.

Complaints against group buying sites have also nearly halved in recent months, according to NSW Fair Trading.

Improvements include better complaint handling processes, taking responsibility for problems and industry-wide self regulation. Nationally, complaints about group buying have dropped from more than 800 cases in May 2012 to about half that number in September.

"However, the level of complaints levelled at a few specific traders continues to be of concern to us," the Fair Trading commissioner Rod Stowe said. "We will continue to monitor the industry's compliance and will not hesitate to take enforcement action when necessary."

Telsyte names Groupon, Scoopon, LivingSocial, Cudo and OurDeal as the top five active players in the market, which generate more than 80 per cent of market revenue.

"The industry is starting to mature, with merchants and group buying sites understanding that they need to be more selective in the types of deals offered.

"Food, dining, health and beauty will continue to provide a solid base of revenue. In 2013 we expect to see the emergence of deals which aim at more affluent demographics and deals that require consumers to commit to ongoing delivery of products such as health supplements, baby consumables and hygiene products," Telsyte senior research manager Sam Yip says.

Scoopon is a major industry player, launching in May 2010 and selling more than 6 million deals.

The site's general manager Jon Beros says Scoopon has remained a dominant player because it has adapted its offerings as consumer preferences have changed.

At first, consumers were turned on by the offer of a cheap deal, but now they want deals on offer on mobile and localised deals they can access close to home.

"When the industry launched, any sales person with a phone and internet access could run a group buying site. But there was an unsustainable number of sites operating, so something had to give," Beros says.

"Scoopon has continued to grow because we understand consumers want compelling offers for an experience they have wanted to enjoy for a while, at a great price. They also want those grudge buys, like a car wash, at a reduced rate," he says.

Telsyte predicts that the industry will see new players create restaurant booking sites, which provide exclusive discounts to subscribing consumers, and online coupon sites, which allow consumers to access discount coupons for minimal cost.

But businesses considering listing an offer on a deal site should approach with caution, warns the owner of Ballina Beach Village, Rikki McDonald Grinberg.

"We have been steady users of deal sites to market our property over the past few years," she says. "We achieved $72,000 in sales in the first deal we sold, but with mixed results. We have learnt not all deal sites have the right demographic or the database to justify the sale."

Vendors need to be careful about how they use a deal and be sure they can meet the obligations, she warns.

"The deal sellers are always pushing for a really big deal, but that can be financially crippling to the vendor.

"There needs to be strict rules regarding the uptake of the deal," she says.

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