Groupon has delivered yet another quarter of disappointing results in the latest sign that the group buying market has cooled considerably.
And according to Australian experts, the group buying market is continuing to shrink.
“We’re seeing a lot more consolidation when it comes to group buying sites,” Telsyte senior research manager Sam Yip told SmartCompany this morning.
“The top end of town is powering ahead, but we’ve seen a lot more small sites close due to a lack of revenue, and a lack of opportunity as well.”
Groupon’s shares have hit a record low, dropping 17% to $3.92, after it announced revenue of $568 million and a quarterly net loss of $3 million. While that’s improved from $54 million a year ago, it’s still not enough to convince the market.
It also announced 80 job cuts.
Chief executive Andrew Mason said that while there was good performance in North America, Europe was still having its “continued challenges”. The company has said as much through the year.
Through the year it’s also lost 80% of its value.
The result is indicative of a diminishing market in Australia. While top players like Scoopon and Groupon continue to trade well, smaller players have all but disappeared. Just last month, Deals Direct closed its daily deals operation.
In September, SmartCompany reported on the shocking collapse of group buying site SoSharp. Customers were left without refunds and suppliers in the dark over the collapse – and the chief executive could not answer simple questions about the debacle even after SmartCompany contacted him.
Yip says it’s a simple matter of demand. After a glut of deals, the smaller, less well-run sites have disappeared while the well-capitalised businesses prevail.
“We’ve seen a number of sites close due to lack of revenue and opportunity. Many have found it hard to sustain themselves in this sort of market.”
SmartCompany has heard from industry insiders that some leading group buying sites are not doing anywhere near as well as they used to. And executives have left the industry, too. Cudo chief executive Billy Tucker has pursued his own start-ups after leading the group buying company, and earlier this year it was reported Yahoo! would not pay any more performance payments to its Spreets website.
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The strongest sites, Yip says, are those that have been able to maintain a strong entrepreneurial emphasis and stay away from using the site as a marketing channel.
“The strongest sites have 24-hour deals. We’ve seen it’s harder for them to cut deals with merchants, so we’ve seen a lot more product and a lot more travel deals.”
“You’ll see some weaker sites run deals for more than one day, because they’re finding it harder to get deals.”
Deals.com.au founder Adam Schwab says his company has been recording some of its best results ever, but “hasn’t noticed a great deal of change in the market”.
“I imagine there’ll be even more consolidation to come in the next six months.”