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.
Professor Utpal M. Dholakia, Rice University, the guy who made probably the first academic study about group buying promotion published a new paper – “A STARTUP’S EXPERIENCE WITH RUNNING A GROUPON PROMOTION”. He did this job with Gur Tsabar from Gourmet Prep Meals (GMT), a start-up that participated in the study.
GMT is a start-up business from Texas that sells ready-to-cook food sets online. After couple months of operation GMT launched Groupon promotion and share with researchers all the data from their accounting system to analyze the effect of group buying promotion to GMT business.
Groupon promotion definitely boosted the revenue;
The overall profit was not affected significantly before the end of promotion, taking in account coupons that were not used the effects is positive;
The margin dropped during the promotion;
Peak loads with most active redemption of coupons were the start and the end of promotion time, heavier at the end, just before coupons expired;
Group buying customers are especially useful for start-ups, since help to test the business model and provide valuable real feedback
Group buying industry is booming in Australia according recent research of Telsyte (business unit of Gibson Quai-AAS Consulting) and the market will grow 284% this year.
The research covers over 20 group buying web sites that offer heavily discounted group deals for Australians. Over 79% of the market share reported to be taken by four leading players (Spreets, Scoopon, Jump On It, and Cudo).
This figures correspond quite well with the study that we did last fall.
Telsyte makes some interesting forecasts about future industry trends, namely (my comments are in the brackets):
• Arrival of large online multi-nationals such as Google, Facebook and Groupon into the local group buying market (actually GroupOn is already here).
• Agencies representing merchants in deal negations and analytics.
• Proliferation of mobile group buying applications (at least Scoopon and one new smaller – CrowdSauce already have iPhone apps).
• Local media publishers entering the group buying industry through white-label software platforms, acquisitions, or distribution partnerships (we also already see it, with Telstra/Sensis that launched YellowPage Offers).
R2i surveyed 296 marketing professionals in Nov 2010 and 45 percent stated that time and resources would be their greatest combined challenge in 2011. Forty two percent stated that time and resources were the greatest barriers to entry into social media, and 38 percent that their biggest mistake with social media was not allocating proper time and resources. One possible reason for this conundrum may stem from companies trying to be all things to all people in all places, which is simply a time and resource impossibility for programmatic social media marketing. By optimizing scale and relevance within their social media programs, marketers can better devise and execute on activities that are necessary for effective social media marketing, such as strategy development, headcount allocation, and content creation.
After the phenomenal success of GroupOn, new group buying (group purchasing) web sites had started to appear virtually every day. It is extremely hot trend and even in Australia we have many of them. One day I asked myself, who is the leader of this market? Who close deals more often, attract more consumers and get highest volume of the transaction? So when I got some spare time, I conducted a small research to answer this questions and find out more insights.