Sam Yip agrees, although says the industry’s problems are broader. “There were low quality merchants that didn’t understand how to utilise the group buying model, and consumers who didn’t know what to expect from these new sites.”
One critical factor, Yip argues, is that sites started offering deals that lasted more than 24 hours, which cheapened the value of the deals on offer. The more you do that, he says, the more these sites become like department stores – the very type of retail offer they had tried to avoid.
“The whole 48-hour deal thing is a critical factor. Once you start holding deals over two days, then you lose the ability to come up with new deals every day that seem fresh.”
“A large portion of the control needed is found in innovation. These companies have the tools to innovate.”
Deals.com.au head Adam Schwab is more direct in his criticism. The sheer amount of emails bombarding consumers is an annoyance, he says. In a quest to make group buying more customisable and focused, users are hit with emails two or three times a day.
“A lot of my friends are happy to receive emails multiple times a day, but you lose a lot of people in the process of doing that and it becomes frustrating for them,” says Schwab.
The massive amounts of marketing spent by both Groupon and LivingSocial, subsidised by American parent companies, have allowed them to control large slabs of the market – although Groupon still far outstrips LivingSocial in market share.
Mike Sneesby says it’s only a matter of time before that marketing spend comes back to bite the more troubled companies – which will feed into more consolidation.
“Now, I don’t know the bottom lines of every company, but I’d say there’s room for only three or four players in the main space. Anecdotally I’ve heard more businesses have been pouring money to keep their operations going.”
“From my perspective, that can only go on for a certain amount of time.”
He also argues that the local companies are at an advantage, in that “we aren’t tied to international parents”.
Schwab agrees that a local foothold can bring benefits. “I’m not privy to the financials for either one of those companies, but I’m guessing they’re losing quite a bit of money being attached to their parent companies.”
Groupon Australia chief executive Andrew Mason says the company’s strategy is to differentiate itself by focusing on tech upgrades like customisation tools.
“For Groupon Australia to maintain and grow its position as market leader, we need to stay ahead of the pack and continue to push industry boundaries.”
Adam Rigby, on the other hand, feels the combination of a media and group buying division just doesn’t make sense.
“All internationally-based organisations have overheads and complexities, but I think they’re far less distracting than the problem of having a whole different corporate agenda,” he says, referring to media entities.
“So you may have an international structure in one business, but there’s misaligned strategy in the other. The signatures are very different.”
Yahoo!, Nine and Ten all bought group buying companies in 2010-11. In its defence, Cudo chief executive Mike Sneesby says the business is developing long-term potential by partnering with brands like Getaway to validate its travel deals.
