The Australian group buying industry turned over $63 million in its first year of operation, new research from Telsyte has revealed, but only four top dogs out of nearly two dozen sites are making most of the money.
The figures come as American group buying giant Groupon, which started the group buying craze in the first place, is set to launch its first deal in Australia today under the StarDeals brand.
The company could not enter the Australian market under its own name due to an ongoing legal battle with rival Scoopon.
Telsyte research manager Sam Yip said there are more than 20 group buying sites operating in Australia and there is no doubt that more will pop up as the market matures.
“Last year 97% of the revenue that was generated in this market occurred in the second half of the year. It was quite a large number and there are a large number of sites operating in this space,” Yip said.
“The really low barriers to entry would be one of the drivers here. The technology behind the group is quite minimal – anyone can set up a group buying site, get some good deals and then be able to make some revenue with that.”
But despite the explosion of sites offering group deals only four are actually making money – Scoopon, Cudo, Jump On It and Spreets, which was recently acquired by Yahoo!7. Telsyte said those four sites are turning over 79% of the revenue, representing just under $50 million.
But that number is set to explode, with Telsyte saying the market will turn over $242 million this year and will double its head count to 700.
But despite the concentration of power Yip said there will be a place for small players and any consolidation won’t necessarily be as violent as first thought.
The bigger sites mainly plug the same types of deals – spas, restaurants and various thrill experiences such as paintballing, white water rafting and high-speed boat rides. Yip said that won’t change and the smaller sites will be able to provide something different.
“I don’t think these other sites will die off quickly. There is a lot of space for smaller players, especially those in a niche market that have generated a strong following,” he said.
“There is a niche market here that is untapped. Look at sites that could specialise with deals for men or women or travel or family and so on. You could have a site doing nothing but automotive deals.”
Yip said that won’t necessarily excuse the larger players from delaying innovation. He said in the long-term the main sites will need to start offering new types of deals.
“It’s OK right now to offer spas, food and wine, etc because all of the locations in Australia haven’t been tapped yet. But in the medium term it will start to get crowded in that space and they will have to do something different to innovate.”
Some are beginning to realize that – group buying site Zoupon has changed its URL to deals.com.au in an attempt to gain more share of the price-conscious market. But Yip said that isn’t necessarily the innovation that will be required for controlling the market.
“I think when they changed that URL, they lost two things – part of the word ‘coupon’ and part of the word ‘group’. I think they may have lost that social aspect of group buying and will need to communicate that,” he said.
Yip said it is still early days for the group buying market and that businesses that have a good hold now will be able to go far if they pay attention to the key market trends – especially the hyper localization of deals.
“There are now sites branching off into different locations, so you have the main cities such as Melbourne and Perth, but then they are going into smaller cities like Brisbane, and even the Gold Coast. It’s a young market and it’s going to grow quickly,” he said.
“It’s interesting that only one of the sites has an iPhone app – Scoopon. The rest of the sites haven’t tapped that market yet and the hyper localisation of this is going to become important. That’s what these sites need to address.”
The comments come as Groupon prepares to offer its first deal in Australia weeks after the site StarDeals.com.au was set up. Groupon originally wanted to enter the country using its own brand but was forced into using StarDeals due to a legal battle with Scoopon, which registered the Groupon trademark locally last year.
The first deal is only available for Sydney residents but the company hopes to move on to other capitals soon.
Groupon was contacted for comment this morning but a spokesperson was not available before publication.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
