Most businesses running deals through group buying sites were satisfied and the majority would do it again, according to new research into the industry conducted by market researcher Telsyte.
The research – which studied 359 respondents that had run deals through sites including Groupon, Scoopon and Jump On It – found that 94% of businesses were satisfied with their promotions, with 39% saying it was excellent and 6% saying it was poor.
Eighty-five per cent of merchants said they would run another campaign, with Telsyte senior research manager Sam Yip saying the 15% who wouldn’t weren’t necessarily turned off by the concept – it just won’t deliver massive benefits.
“The ones that aren’t, it’s mainly tied back into the fact that they just didn’t plan their group buying deal well enough or in fact group buying was either irrelevant for their business or just unsuitable,” he says.
The Telsyte Australian Online Group Buying Merchant Study 2011 was conducted over four weeks between July and August using 359 merchants and a database of more than 22,000 deals.
The survey points out that many merchants who say they don’t want to run another campaign indicate that was because of trading terms, while others said another deal would have to be more carefully planned, with a cap on the number of coupons handed out.
Yip says that is an example of the market being crushed by its own success, because some group-buying sites had to recall deals during the past year after selling too many items.
Over the past week Jump On It experienced a backlash after saying items would be delayed in shipping due to overwhelming demand and last year Cudo was forced to halt one of its own offers.
“The market is really exceeding expectations in terms of growth,” Yip says, pointing to figures that show the industry is growing 72% every quarter and is set to be worth $400 million by the end of the year.
“Businesses are jumping on board all the time and some of the main sites are unable to fulfil demand for services because there are only so many deals you can have per day,” he says.
The study into the local sector reveals some telling statistics. Nationally more than 7800 businesses have run deals on group buying sites, with most deals occurring in Sydney, followed by Brisbane, the Gold Coast and Melbourne.
Of businesses running group buying deals the top reason given was to use the deals to increase the customer base followed by increasing awareness of the business and wanting more business during quiet times.
Increasing revenue was listed as the fourth reason to use group buying and measuring performance of marketing was listed as the fifth reason.
The study shows that merchants who set specific goals for deals met their goals.
Figures show that of 99 merchants who set a goal to acquire new customers 98% achieved it and of 75% who said they wanted increased foot traffic 87% achieved that goal.
Eighty-three per cent of the 233 merchants who wanted more customers achieved that goal and the study indicates that group-buying sites need to better help merchants to set particular goals, noting that “critical to this is follow-up calls and post-deal services”.
That recommendation comes from a realisation that group buying has become more sophisticated during the past year.
“The businesses have really worked on their internal processes. The sales teams of all group-buying sites have improved significantly and it’s moved away from trying to get merchants via cold calling and untrained sales teams,” Yip says.
“Now you see actual business development managers coming in, who actually chart the whole marketing process.”
The figures show that most merchants see value in combining group buying with other market channels – 35% cite social marketing and 54% cite offline marketing flyers, with the study noting that offline channels continue to be important for group-buying customers.
Critical to return business, sales support and customer service were cited as important factors when considering running a group buying deal, followed by clearer and easier payment terms.
Many group-buying sites run different types of payment systems. Some pay businesses up front but others only pay cash when vouchers have been redeemed – an approach for which the industry has been criticised.
Merchants want lower commissions and more input into the design and text used in the deal itself.
Yip points out that the industry has been extremely successful and with only 10% penetration in Brisbane, 13% in Sydney and 8% in Melbourne, the market is still untapped.
“The next area of growth is actually in the travel category and there is a lot of revenue in that, and also in ecommerce, with actual physical goods,” Yip says.
“You see examples of that in Australia, a lot of sales are actually with physical products now. We can expect to see that more, especially in sites such as Catch of the Day which sell physical products anyway.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
