With the recent influx of daily deal, and group buying sites launching, the question needs to be asked, is the market crowded? We would say yes, the market is getting crowded. But with the nature of this business model there is an almost never ending supply of businesses wanting to get their deal on a group buying site!
March 2011 saw 5 new group buying sites launch. This included offerings from several corporate heavyweights such as TreatMe (FairFax), Yazoom (TV Shop) and Cudo (Mediaworks/Microsoft). These high profile launches have been the final confirmation that the group buying business model is a legitimate one, and set to be highly profitable.
Lets face it, a large media company (with shareholders) isn’t going to invest millions in a new venture if there is a high chance it will fail. Shareholders simply aren’t impressed if initiatives fail, and the share price of a media company can tumble. The group buying model IS here to stay, and it can be profitable if done right.
A New Trend Emerges: Deal Double Ups
The large number of these sites, (now numbering in the 70’s) give rise to a new trend. It is common to see the same or similar deal from an advertising business, show up on 2 different deals sites within a few days. And it has happened more times than I can count!
From this we can gather that a business that is keen to be featured on a daily deals site will create a deal that works for them. Then when approached by different group buying site, will offer that same deal. It makes sense, you can compare the success of each site running the same deal.
Household name brands will limit deals
James MacAvoy, the guy that’s runs TreatMe, says that businesses that offers deals on one site are getting bombarded on a daily basis from the other sites. MacAvoy reckons that in the near future, businesses will select one or two deals sites to advertise on periodically, and turn down others. OneDayDeals agrees that could be the case for large, national brands, but not so for smaller local businesses.
Larger brands have to worry about brand erosion and having cheap deals all the time will cheapen their brand. And they have to worry about cannibalizing their normal sales channels. They can’t have customers only buying when a deal comes up each week.
So of course well known brands will be limiting the amount of deals they offer. But smaller businesses, like your local hairdresser who may be struggling in the economic climate are going to be keen to offer as many deals are they can. They don’t have to worry about things like national brand erosion.
Where smaller sites can compete
The larger sites like GrabOne and TreatMe will focus on offering deals from well known brands as they will sell the best. They will start to shy away from helping lesser known local businesses. But smaller group buying sites can really get down and reach these smaller local businesses and offer them better deals on the commission for the deal.
Group buying deals are not really a way for the advertising business to make money on the initial deal, more to get a rush of new customers experiencing the business at a low introductory price. However if a deal sells in the hundreds, the cost to the business to supply services at a major discount (lets says 75% off RRP when the commission is taken into account) means that business could be reluctant to do further deals.
There is a big opportunity for smaller sites. The larger group buying sites have done the hard yards getting the business to run a deal. It will be easier for smaller sites to strike up bargains if they can offer a lower commission. There are also other ways small group buying sites can grow.
The Future for Daily Deals in New Zealand
Our guess is that large and national businesses will more often than not choose the larger sites to run deals. In the main centres, GrabOne and TreatMe will start to favour the larger businesses as their databases grow. And the larger sites can do bigger deals.
But with the majority of the New Zealand economy being made up of hundreds of thousands of small businesses, there is plenty of opportunity for smaller and new sites to take a local approach. These small businesses are doing it tough with consumer demand down, and are keen get on a deal sites. I know, because I get emails every few days from small businesses asking OneDayDeals to run deals. We don’t even sell deals on the site and businesses are still asking us!
Smaller sites can go direct to the smaller businesses, even local businesses, that customers outside of the suburb have never heard of. This is where the big opportunity lies for smaller group buying sites. If they have a decent email database then they can do well. Besides, a small hairdressing shop probably couldn’t easily handle the number of new customers that say GrabOne could bring them in single days deal.
World Leader in Daily Deals comes to NZ
So we see nothing but positive growth for the group buying market in New Zealand. And as final recognition that group buying sites are here to stay, world leader Groupon will be launching Groupon New Zealand in a matter of weeks.
To keep up to date with the daily deals industry check One Day Deals regularly.