Group-buying consolidation tipped to create niches

The group buying market will undergo radical consolidation over the next two years, with businesses having to establish niches in order to survive, according to a market research firm.


Sam Yip, senior research manager at Telsyte, says as the market becomes more crowded, more group-buying businesses will either merge or fold, forcing players to carve a niche in order to survive.


“We’re still in the early days of group-buying and we haven’t seen any strong niche sites emerge yet… But I see opportunities in travel and accommodation, leisure and recreation,” Yip says.


“Once budding entrepreneurs start to see that, they will start launching sites around these services.”


Yip says prior to the emergence of niche sites, the market will experience a heavy period of consolidation, although he does not expect this to occur for another 12 to 24 months.


He says a site such as Scoopon, identified as the market leader for this quarter, has the potential to be purchased by a bigger company in the future, although it’s too early to tell.


“Some of the most successful group-buying sites have only been around for a year. They’re still trying to get a lot of runs on the board, they’re still database-building and there’s still a lot of trial activity happening among consumers,” he says.


Despite the embryonic nature of group-buying, Telsyte research estimates group-buying sites in Australia to be worth around $73 million in the first quarter of 2011, tipping the sector to exceed $400 million this year.


The report reveals Scoopon, Spreets, Cudo and Jump On It are the top four market players, generating 80% of the industry’s revenues.


According to the report, group-buying deals have become the new “water-cooler” conversation-starters, with the phenomenon fast becoming a mainstream way to shop online.


Jon Beros, general manager of Scoopon, which recently celebrated its first birthday, says there has been rapid growth in the number of small operators in the sector but isn’t convinced they will last.


“I don’t think everyone’s going to survive. Some will try to specialise in certain niche areas but there’ll be a lot of consolidation and some will fall out of the market as it gets harder to source the deals and to have a point of difference,” he says.


However, Beros says the timing for online group-buying is ideal, tapping into the broad use of social media and consumers’ increasing confidence with regard to shopping online.


Yip says he is seeing a clear shift from Twitter to Facebook when it comes to promoting deals.


“Group-buying sites are stagnating on Twitter, and Facebook is increasingly viewed as a more favourable platform to market deals – it’s more interactive and has a more natural word-of-mouth feel compared to Twitter,” Yip says.


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