95% of group buying revenue generated by just eight sites: Report
About 95% of the market revenue in Australia’s group buying industry is generated by just eight sites, new research reveals, but an expert says niche players still have an opportunity to compete.
According to research by technology analyst firm Telsyte, Australia’s group buying market grew to $498 million in 2011 and is tipped to soar even higher in 2012.
Telsyte expects the group buying market to grow an additional 30% in 2012, exceeding $600 million and reaching $1 billion no later than 2015.
In 2011, the best performing category was physical products such as clothing and electronics, now accounting for 30% of the total market, which is dominated by a handful of major players.
“About 95% of the market revenue is generated by the top eight sites,” Telsyte senior research manager Sam Yip says.
The top eight sites for the 2011 calendar year were Scoopon, LivingSocial, Spreets, Cudo, Groupon, OurDeal, Deals.com.au and Ouffer.
While there were more than 80 sites in operation in 2011, Telsyte expects the barriers to entry will increase in 2012 and some sites will fail due to lack of scale.
“Group buying is controlled so heavily by eight to 10 market players – it’s a very competitive space,” Yip says.
“The top players are spending a lot of money on marketing, but they’re going after the same customers as the niche players, so it’s a David and Goliath battle… It’s a hard sport – going for the same customer.”
However, Yip says niche players can still compete with the major players as long as they do something different.
“When it comes to small players in the market, there are opportunities out there right now around having a twist on the group buying model... [such as] gamification,” he says.
“[Group buying site] Wyngle came on board with a model around spinning a wheel to get a discount or get something free.”
According to Yip, the major sites tend to stick to well known categories such as travel, health and beauty, leisure and recreation, food and dining, and products and services.
“There is a space for niche players that offer [deals in sub categories] such as sporting equipment or event,” he says.
“They should also think about partnering up with niche local media publishers.”
Yip says niche players can also use social media in a much more personal way than their larger competitors.
“A lot of [the main sites] use platforms such as Facebook and Twitter to talk about how great their deals are as opposed to talking to customers one-one-one,” he says.
“In 2012, loyalty programs and targeted deals will continue to drive sales.”
“2011 was all about customer acquisitions. Sites did everything they could to get a customer base. The next step is using that data you have to work out targeted deals.”
“One thing that’s positive is that Australian consumers are not loyal to any group buying site – they go where the best deal is. That’s promising for smaller players.”
With regard to merchants, Yip encourages niche players to consider the more traditional businesses such as pubs and clubs, which have been largely overlooked.
“For things like Brazilian restaurants and scuba diving, the market is saturated. With pubs and clubs, there’s an opportunity there but it hasn’t been tapped yet,” he says.