Are there too many group buying sites?
Yes, according to coupon industry guru Simon McCord, who says although group buying sites are good for his business, there's more than enough out there these days.
The Shop A Docket founder also says the business is in the best financial state in its 25 years, with $24 million in revenue expected this year after cornering the supermarket docket market.
The dockets reached about 93% of the population, and contrary to expectations, are popular with high net worth individuals.
You’ve been in the business a long time. Perhaps we’ll start off by you telling us how Shop A Docket came to be 25 years ago.
Well, it started in Brisbane and I guess the model was providing the retailers, or the supermarkets primarily, with a free register roll and in turn they gave us the advertising rights to the back. That worked very successfully. Initially we started at the Pick ‘n Pay hypermarket in 1986 and then Woolworths and Coles progressively adopted the model in years following.
And I guess the big change in our business during that last 25 years was about in 2000, when the majority of point of sale globally started fairly quickly moving towards thermal printers, which is a significant step from our perspective as the paper is more expensive.
So since that time, rather than free rolls the rolls have been at a subsidised rate. They are still certainly less expensive than what they can buy blank rolls for, but not what they had become accustomed to which was free register rolls.
How did they react?
Oh, it took awhile but certainly, to retain the model it was inevitable that was the way it had to go.
Okay, what figures do you have on the take up rates? How do you know how many people are looking at the back and how many of those are taking the docket and using them?
Well, we have used independent research for obtaining that data so AC Neilson have worked with us for a number of years gauging readership and usage.
Readership and usage can be impacted by the amount of content we have too, so it will obviously vary from market to market.
But I think it would be safe to say that 77% of shoppers read the back and 29% always read them. The difference between the 29% and the 77% is that people don’t read them all the time.
We provide the advertising on a six-weekly cycle in capital cities and there are only approximately 15 on the back so if consumers shop two or three times within that campaign they will probably start to receive multiple ads of the same.
And of those people who are reading, what is the take up?
That’s the million-dollar question.
What dictates it though is the strength of the offer.
Just to give you an idea of that, we do a car service offer that might be a $99 car service, grease and oil change and so on, in percentage terms it would be quite negligible for the amount we distribute.
We distribute 31 million Shop A Docket coupons a day through the supermarkets, so if you compare that service offer with a one for McDonalds, clearly they are a much lower-ticket item so there’s a much higher ticket response.
It is very hard to say what percentage of them are redeemed and it is further complicated for us as a lot of the clients don’t provide us with that information.
I guess primarily they don’t want that information getting into their competitors’ hands.
Do you have a lot of repeat clients?
Yeah, that is the best testimony. I think we are averaging about a 60% repeat and we have 5,000 small businesses advertising with us on an annual basis.
You mentioned auto and McDonalds as a good take up offer, what kind of things actually work?
Our core categories are restaurants and food; they are the most sought-after offers, closely followed by entertainment, which can cover anything from theme parks – the likes of Dreamworld are active uses – to video stores hiring videos. So it’s a fairly broad category.
And then automotive, which is mostly service not sales.
What’s in favour at the moment?
Certainly restaurants and fast food are by far the most popular. So if you have a look at your Melbourne dockets people like pancakes, KFC and McDonalds – those types are very popular.
Did you see a shift in the GFC?
Well, we see our businesses as countercyclical so it has actually benefited us.
Consumers are more concerned about saving money at the moment than they have been for some time, so that actually worked to our benefit, as has the introduction of daily deals, which has introduced a whole new demographic into using coupons. A younger generation are certainly most active with the daily deal type work.
Woolworths has returned as a customer, what effect do you expect that to have on your bottom line and in terms of your market reach as well?
Well, we went from 16 million coupons per day to 31 as a result of extending back into Woolworths and Big W.
So you’ve nearly doubled it. Over what time period?
Yes, nearly. We started on the 31 August [this year] so it has been significant.
And we have seen that in our online activity too because we are carrying a lot more content online. There’s been quite a surge in the usage of our website.
In the docket market, do you have any competitors?
Not now, no.
What happened to them?
They have all gone different ways. The last one that was doing Woolworths has now embarked on a daily deal type website.
When did you start going online and how does that differ from your docket business?
We went online back in the late ‘90s in a joint venture with Village Roadshow. Village had developed the website and approached us for the content and then they went in a different direction a few years later and we acquired the site.
It has really been a value-add for our customer base; I’m talking about our advertisers as well as the customers. So consumers can go into our website and search the offers by postcode or category, so it is really an extension, we see it as an extension of existing printed docket channel.
Is it the same products?
Yes the client can just go on and buy coupon space online if they wish, some do but less than 1% do that. The majority are just clients that are on the printed dockets in the supermarkets and then they are also uploaded on the website. The advantage for the consumer is that if you want the McDonalds offer and you didn’t get it at the supermarket you can go online and print it off.
How do you manage that though between keeping Woolworths and Coles happy but also having your own online offering?
They have only ever really shown interest around the content that is distributed through their own stores. As a business the fact that we have an online presence is not a concern for them.
Group buying has become increasingly popular. Do you think there are too many sites now?
They’d be in a better position to answer that than me but I would suggest there is.
Certainly from our perspective we are just in the process of appointing a CEO into our digital space with the view that we see the daily deals as another extension of our coupon business, so it is something that we look to be able to offer our client base at some time in the future as well.
What is the revenue breakdown between your coupon and online?
The online is about 10% of our revenue.
But you’re looking at growing that?
It’s already achieving 30-40% growth annualised.
And how about the dockets business?
I guess that is a bit harder when you have got all this varying distribution with Woollies, but I think it would be more realistic to say that it would be more between the 10-12%.
It is still growing significantly, particularly now I think that we are able to offer consumers so much local distribution in their own markets; I think we are reaching in excess of 93% of households.
Is the business in the best financial shape of its life?
Yeah, that would be a fair comment.
And is that because your competitors have disappeared from dockets and you are in the major supermarkets?
I think now that we are in the major supermarkets and our sales force is operating the best that it has in our 25-year history and that is really what has made the difference, bedding down our sales force.
How many employees do you have?
How much revenue are you expecting for this year?
We are budgeting on 24 million.
You mentioned before that online buying group sites are significant in introducing a new generation to deals, are you seeing any change in the people who are taking up your offers?
Not significant change. We are getting some very good data back from clients that they are seeing younger families using our dockets.
We believe that the daily deal activity is probably making coupons a more accepted practice in that younger demographic.
Was there a sense previously that if you were middle class you wouldn’t use them?
Well interestingly, AC Neilson research has always shown us that the higher socio are the more prolific users of our dockets, which surprised us.
But when you analyse it, when we have a fast-food offer in a lower socio area that will have the most take up.
Quite often, though, we are doing accommodation or higher ticket item offers and the higher socio areas are the more active users of those offers.
So you tailor the areas to the dockets?
Well, I think the clients do, the advertisers, they are the ones who can pick and choose the particular areas they want to distribute to.