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Group Buying: You've Come A Long Way, Baby

By Oonagh Reidy | Wednesday | 29/05/2013

Group buying falls in 2013 but analysts say it's stabilised after crazy growth.

Consumer spending on sites like Groupon, Scoopon fell 7% to $115 million between January and March, according to analysts Telsyte. 

"The industry is still quite young, the first few years saw treble digit growth...now this has stabilised," Sam Yip, Telsyte analyst told Smarthouse, when asked about the revenue drop. 

Buying sites have come a long way from even a year ago, when the industry was "running hot."

Group buying industry peaked at 90 sites in Oz alone as Groupon, Living Social discounts on anything from horse riding to a weekend in Batemans Bay gripped the nation. 

But not anymore - there are 5 main players - Groupon, Scoopon, LivingSocial, Cudo, and OurDeal - after a major period of consolidation with many small players wiped out. 

Telsyte expects the market to remain "steady" in 2013, predicting revenues of $500 million. 

In Q1, the fastest growing were travel and premium event offers, while food, health and beauty will continue to be the base of group buying revenue, the analyst believes. 

"Consumers are now used to the concept - it's part of the e-commerce mix," says Yip. 

But another change, he points out is the drop in the use of aggregate sites like Deal.com.au, or Allthedeals.com.au as "consumers don't see them as the be-all and end all any longer." 


But although group buying starting out with flogging cheapie China imports, this is rapidly changing.

"We're seeing a lot more electronics goods on group buying sites. There will also be a lot more branded goods, including the electronics sector, in the future," Yip predicts. 

SmartHouse recently spied a host of deals sites flogging everything from old (and new) iPhones, Samsung Galaxy S II, S III , Galaxy Tabs,  Acer PC's and Kodak cameras. 

The average price of goods on Groupon and Co has also increased "and keeps increasing", and items at $500-$1000 are "selling well." 

But it's not just old stock on a deal, new items costing $1000 and upwards are also sold increasingly via group buying offerings, he says. 

The items offered will be better, premium end products in future - Telsyte predicts more variations of the daily deal concept and those targeted at affluent demographics.  These 'variations' include deals which require ongoing commitment like delivery of products such as health supplements, baby consumables.

"A lot of brand names see it as an opportunity to clear stock and compliment existing channels," he says.

New players like restaurant "booking sites", which provide exclusive discounts to subscribers and "online coupon sites", are predicted to emerge. 

Fast moving consumer goods like low-end mobiles, toiletries, tickets, fast-food offers, and higher-priced offers, look set to be strongest categories. 

Yip also says the troubled group buying sites had in the past, including poor customer experience, overburdened merchants are all but over.

"Bad consumers and merchant experience is on the decline" says the analyst, and merchants now know what to expect, when they put their business offering on these sites. 

"Merchants and group buying sites are understanding that they need to be more selective in the types of deals offered" and improved customer service, and creating longer term relationships with successful merchants, are core to group sites strategy. 

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