Group Buying Websites – Boom or Backfire?

A study by Telsyte, commissioned by LivingSocial, shows the group buying industry has grown 72% in the last quarter. Telsyte estimates the industry will be worth about $400million by the end of 2011.

The Online Group Buying Merchant Study 2011 was conducted in September 2011 and was based on a random survey of 359 businesses across all leading group buying sites in Australia, including Scoopon, OurDeal, Ouffer, Spreets, Groupon and LivingSocial.

From a retailer perspective, the figures in the study look strong, with findings showing that more than two-thirds of businesses acquired new customers, increased foot traffic and increased overall customers as a result of a group buying campaign. “For brands that are not based around discount pricing policies, there is a risk that participating in group buying sites could damage brand loyalty with existing customers that have paid higher prices.  However I think this risk is relatively small,” says Matt Hampshire, CEO and Founder of contiigo.

The study also showed that 85% of businesses indicated they would run another campaign once they tried the service and that 94% of businesses were satisfied with their group buying promotions.

LivingSocial Complaint
Customers vent their anger on public forums

The research is at odds with recent public outcry from disgruntled group buying shoppers who don’t feel that the offers meet expectations. The group buying model is failing many consumers who are finding it difficult to redeem their coupons and some small businesses who are finding they can’t honour their deals due to the overwhelming uptake. Rather than engaging consumers through brand awareness, group buying sites can tarnish a brand if consumer demands are not being met.

At the moment, group buying sites appear to be a double edged sword. So with statistics showing massive growth, will the industry self-regulate to avoid customer disappointment? Only time will tell.




3 thoughts on “Group Buying Websites – Boom or Backfire?

  1. We see a lot of negatives coming from overseas experience where the group buying sites have been active longer. I think that Forrester’s forecast is spot on.

    According to Hitwise, by the end of August traffic to the UK Groupon site was down 50% compared to it’s peak in June this year.

    Lightspeed Research interviewed 1,000 people about their use of daily deal sites. It found that 54% had made a purchase while 59% of those registered on deals sites had not used any of them, 22% just didn’t like the deal financially and 10% cited location or geographic constrains.

    “U.S. Interactive Marketing Forecast, 2011 to 2016,” by Forrester analysts predict that the daily deal will be dead by 2016. ”Consumers will grow so conditioned to micro-impulse offers that they’ll lose practice at considered decisions – in all walks of life, not just when buying spa treatments,” wrote Shar VanBoskirk, a Forester analyst and the report’s author. “Facing a cultural descent into maladroit judgment, employers (and spouses) will blacklist impulse deals to keep people intentional.”

  2. According to our research the Australian daily deals market has actually declined by 10% from August to September.

    We are a daily deals tracker If you would like more information, including day by day revenues of all the top group buying sites in Australia, as well as market share statistics please visit our blog =)

  3. There has been quite a shake out lately in the Australian market. Many merges and shifts. At a point in time it seemed as if everyone was starting a daily deal site. However, it is predicted that the market is now reaching its maturity phase.


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