Group buying industry future looks not so cloudless

Recent research conducted by Professor Utpal M. Dholakia from Rice University contains facts that are not very pleasant form currently booming group buying industry:

  • just a bit more than half (55.5%) of businesses recorded a profit after group buying promotion, more than quarter (26.5%) ¬†made losses and the rest broke even
  • less than half of businesses that ran group buying promotion are going to do it in the future;
  • almost 3/4 of merchants have no loyalty to group deal provider and ready to switch

So the conclusion that the researchers made is not very positive for group buying industry especially for websites that provide deals: the little loyalty, low rate of interest to repeat purchase from merchants and increasing competition will lead to the erosion of the current healthy margin and make the life of group deals providers harder.

The research collected data from 324 US businesses operating in 23 markets that used group buying promotion in 2009-2011.

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Groupon claims to secure the biggest share in group buying web traffic

As ITwire reported, Groupon Australia (trades as StarDeals.com.au) declared last week that just in few months after launch Stardeals.com.au web site managed to acquire more web traffic than any competing web sites (biggest competitors are reportedly Scoopon, Spreets, Cudo, JumpOnIt/LivingSocial). Representative of US based pioneer of group purchases industry refers to Hitwise traffic statistic.

However competitors, namely Cudo, doubt that this statistic reflects the reality and Hitwise data has several major flaws: limited coverage (no Telstra and Optus for example), traffic is measured at providers (not users) so it is easier to use bots and tricky ads to inflate the statistic.

In my personal opinion these doubts look reasonable.

Has Groupon started to decline?

According to US daily deals aggregation service Yopit Groupon’s revenue decreased 30% in February 2010.

Is such decline a sign of the fade of the daily deals market in general or Groupon’s particular problem? The company has changed it’s business model significantly from single “the best deal in the city”, that worked extremely well and helped Groupon to become multi-million business in very short term. Now there are such stuff as geo-targeted deals, merchant’s stores.
Maybe this is not what Groupon costomers are looking for and this new business model conflicts with Groupon’s brand promise?

Interesting that according Yopit, LivingSocial – second business group buying web site revenue has been growing in “59% in March and is now generating as much revenue as Groupon in major markets”.
GroupOn declines while LivingSocial grows at major markets, March 2011