The group buying model spearheaded by US firm Groupon has caught on like wildfire in Australia, with a plethora of similar sites including Zoupon, OurDeal and Spreets opening up shop over the past year to offer their services to an Australian audience.<\/p>\n
<\/span><\/p>\n <\/p>\n For the uninitiated, group buying sites generally set up a website and offer consumers deeply discounted, loss leader offers from businesses, often restaurants, beauty salons and hairdressers, looking to build market share and profile.<\/p>\n <\/p>\n <\/p>\n The model challenges traditional forms of advertising and attracts smaller businesses that don\u2019t have large marketing budgets because it offers extremely cost-effective national and even international exposure.<\/p>\n <\/p>\n Many of these sites are known as social buying sites. They promote an offer a day, but for the offer to be successful a certain number of people have to sign up for the deal, otherwise it is withdrawn and buyers are refunded their money, the idea being to encourage people to promote the offer through their own social networks.<\/p>\n <\/p>\n The model has its limitations and there are also concerns the market is already saturated in Australia, prompting speculation there will be consolidation in the sector.<\/p>\n <\/p>\n Nevertheless, small start-ups could be the best positioned to enter this boom sector, either as a group buying portal or to generate sales and revenue through promotions featured on these sites.<\/p>\n <\/p>\n <\/p>\n In Australia, the group buying market can be split into self-funded businesses such as Zoupon and businesses with a corporate backer, for example Cudo, which is owned by PBL Media. Last week, group buying site Jump On It secured $5 million in funding from global player LivingSocial.<\/p>\n <\/p>\n Adam Schwab, managing director of Zoupon, says the group buying model is more suitable to smaller businesses.<\/p>\n <\/p>\n \u201cIf done right, managers with a strong commercial and digital background can be cashflow positive reasonably quickly,\u201d he says.<\/p>\n <\/p>\n \u201cBut the saturation of the Australian market offers limited upside and it is probably not a model that\u2019s worth rolling out for a larger firm.\u201d<\/p>\n <\/p>\n Schwab says Zoupon achieved a 100% improvement in revenue in its first three months and has grown to more than 250,000 mail-out and Facebook members in less than six months.<\/p>\n <\/p>\n Commenting on the likelihood of consolidation in the sector, Schwab says it\u2019s possible to guess which group buying businesses see themselves as takeover targets by their behaviour.<\/p>\n <\/p>\n \u201cA few operators, including some of the larger players, appear to be running their business with the clear intention of selling to a cashed-up foreign operator,\u201d he says.<\/p>\n <\/p>\n \u201cThose companies don\u2019t appear to form lasting relationships with their clients. Others, like Zoupon or Cudo, have a longer-term business horizon, trying to build relationships with their clients who will run advertisements multiple times each year to capture a new client base.\u201d<\/p>\n <\/p>\n <\/p>\n At the moment, most group buying sites in Australia offer deals across a range of industry sectors.<\/p>\n <\/p>\n But in the US group buying sites that specialise in a particular industry sector are springing up and Groupon offers its clients the option to tailor their deals, for example, giving females the ability to receive beauty and spa deals and males food and drink deals.<\/p>\n <\/p>\n But, says Schwab, the Australian market is not quite ready for sector-specific group buying offers \u201cuntil there is greater recognition of the industry from business and customers.\u201d<\/p>\n <\/p>\n Intriguingly, media group Anthill\u2019s CEO James Tuckerman recently floated the idea of using the group buying model for the entrepreneurial website. Online commentators suggested the business could offer group buying opportunities in areas such as trademark-in-a-box, logo design and software.<\/p>\n <\/p>\n Greg Weinbren, CEO of group buying site Ouffer Australia, says despite the rapid entrance of new players into the market \u201conly the strong will survive. Ultimately it comes down to the strength of your database and the ability to offer the best deals. Because there\u2019s little to differentiate the players.\u201d<\/p>\n <\/p>\n Weinbren says aggregator sites such as the US-based Dealradar that show all the daily offers in the one place are also gaining traction and levels the playing field among the different operators.<\/p>\n <\/p>\n <\/p>\n But from the perspective of the businesses that advertise on group buying sites, the model has certain drawbacks. The challenge is to manage offers so that they generate repeat business, not just one-off interest from bargain hunters.<\/p>\n <\/p>\n It\u2019s also important to manage the process so that the enterprise isn\u2019t swamped with work while an offer is current, only to leave the business with excess stock and staff when the offer ends.<\/p>\n <\/p>\n Weinbren\u2019s advice to meet this challenge is not to offer deals that are \u201cdiscounted too heavily.\u201d He also says it\u2019s important to limit the number of coupons to a manageable level for the business and stipulate, especially with restaurant deals, that a booking is necessary to use the offer.<\/p>\n <\/p>\n If an offer is over sold and the business can\u2019t meet its commitments (for example if 200 people turn up at the same time to eat at a 30-seat restaurant that has issued an offer) it risks damaging its reputation in the market.<\/p>\n <\/p>\n Weinbren also points out individual vendors have different approaches to the group buying model. \u201cSome people see it as a way of securing future business, others just see it as a profit-generating exercise.\u201d<\/p>\n <\/p>\n <\/p>\n Alex Levashov, founder of online marketing business Altima Interactive, who has conducted research into group buying, says in Australia \u201cthe market is still young and the industry is still growing.\u201d<\/p>\n <\/p>\n But he questions the value of the group buying model for some small businesses, pointing to US research into 150 businesses running Groupon promotions between June 2009 and August 2010 conducted by Rice University\u2019s Jones School of Business that found campaigns were unprofitable for 32% of the businesses surveyed.<\/p>\n <\/p>\n The research also found that more than 40% of those surveyed would not run similar promotions again.<\/p>\n <\/p>\n In addition, of the respondents who reported their promotion was not profitable, only 25% of people who redeemed coupons spent more than the face value of the coupon.<\/p>\n <\/p>\n Plus, only 13% of coupon holders returned to purchase products at full price. In contrast, 66% of those who said the promotion was profitable said an average 50% of coupon redeemers spent more than the face value of the coupon and 31% bought full price products.<\/p>\n <\/p>\n The research also showed that businesses that limited the number of coupons in a promotion reported more demand than those that didn\u2019t and that restaurants sold more coupons than other businesses.<\/p>\n <\/p>\n \u201cBusinesses that use these promotions have to be prepared for a large influx of customers,\u201d says Levashov, who also says businesses that deliver a high level of service to coupon holders increase the chance they will return and pay for full price products.<\/p>\n <\/p>\n \u201cBusinesses have to think carefully whether they can service coupon holders and whether a large number of first time trial consumers will be positive for their business,\u201d he says.<\/p>\n <\/p>\n \u201cIt is a model that does work for some businesses, but they need to put thought into how best to use these promotions and ensure conditions attached to coupons are prominent. The biggest concern for this model is whether bargain hungry consumers can be turned into regular customers.<\/p>\n <\/p>\n “If customers genuinely enjoy the experience and get good service they will be more likely to return,\u201d says Levashov, who advises businesses thinking of running group buying promotions to run a test campaign and analyse the results of the campaign to work out whether it\u2019s worthwhile to run a more extensive promotion.<\/p>\n <\/p>\n Says Weinbren: \u201cit will be interesting to see what happens in the New Year \u2013 there are too many businesses in the space already and there are only a certain number of facials a woman can have.\u201d<\/p>\n <\/p>\n <\/p>\n What about the benefits to small businesses looking to reach customers via group buying sites?<\/p>\n <\/p>\n Emma Carl is the proprietor of Queensland-based beauty salon Mirror Beauty and a client of Zoupon. She says \u201cafter being at first dubious of the benefits of offering a treatment at such a discounted cost, I have found that it has introduced my business to a wider market, particularly outside my local area.<\/p>\n <\/p>\n \u201cZoupon has also provided me with a much larger electronic database with which to share my internal marketing promotions.\u201d<\/p>\n <\/p>\n \u201cThe biggest rules I live by with Zoupon clients are to get their details \u2013 we have been doing a monthly newsletter that offers our own salon specials for years and we know that Zoupon clients love a bargain and are computer savvy. Email marketing is fantastic for the type of clients you attract with Zoupon.\u201d<\/p>\n <\/p>\n \u201cWe also make sure we treat every Zoupon client to a world-class treatment that is unique and different from any other they have ever had. A Zoupon client is not interested in your salon or what you offer so winning over a Zoupon client is very difficult.\u201d<\/p>\n <\/p>\n \u201cI think the biggest mistake that business owners make is not giving a discount customer the same treatment as a full paying customer.\u201d<\/p>\n <\/p>\n \u201cYou need to go above and beyond with these customers because their discounted treatment with you may be the first time they have been to your salon, and you need to leave a lasting impression on them to make you one of their necessities, rather than one of their luxuries.\u201d<\/p>\n <\/p>\n \u201cThe idea is to entice them to make a second appointment, offer them discounts on their next treatment, or make them aware of your current specials. Ask about their current salon, and explain how your treatments and service are better.\u201d<\/p>\n <\/p>\n <\/p>\n Carl also limits the number of offers she makes through Zoupon so the business isn’t too swamped.<\/p>\n <\/p>\n \u201cFlooding internet sites like Zoupon with deals makes your branding appear cheap. I use discount sites at most three to four times a year.\u201d<\/p>\n <\/p>\n \u201cAlso, I find that Zoupon works well in an owner\/operator environment, because my staff members can focus on my regular, full paying clients.<\/p>\n <\/p>\n \u201cThis leaves me free to focus on the needs of the Zoupon customer without having the increased staffing costs associated with the extra business.<\/p>\n <\/p>\n \u201cThis ensures that any income generated from Zoupon sales is not replacing my regular income, but is merely a bonus that I can put back into the business.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" The group buying model spearheaded by US firm Groupon has caught on like wildfire in Australia, with a plethora of<\/p>\n","protected":false},"author":1,"featured_media":62805,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,28,11,22,17,23,13,1,15],"tags":[],"_links":{"self":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/47199"}],"collection":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/comments?post=47199"}],"version-history":[{"count":0,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/47199\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media\/62805"}],"wp:attachment":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media?parent=47199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/categories?post=47199"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/tags?post=47199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Group buying explained<\/h2>\n
Saturation or opportunity?<\/h2>\n
Breaking the market down<\/h2>\n
Discount strategy<\/h2>\n
Growing Australian market<\/h2>\n
Business benefits<\/h2>\n
Keeping brand equity<\/h2>\n