Last year, a deal-a-day panel at SxSW Interactive might have been relegated to a satellite campus (read: off-the-beaten-path Austin hotel). Two years ago, it may not have existed at all. But in 2011, group buying is a $1.2 billion market (according to us), and attendees packed a convention center ballroom to explore how the deals ecosystem would evolve next.
Much of the business interest in group buying gathers around the inviting notion that barriers to entry are virtually nonexistent. While that may be true for product launch, growth and sustenance are another story. Yipit cofounder Jim Moran framed it this way: “The barriers to scale are high, and that increases the virtuous cycle among the large players.” That’s exactly why some consolidation among destination sites is both necessary and inevitable.
A profitable deals concept can be cultivated, but not capriciously. Jonty Kelt, CEO of white-label Group Commerce, advised the audience that deals must be positioned as an extension of brand content. Treating deals as blunt ad units can disrupt brand consistency and dilute customer receptiveness.
DailyCandy, the trendy, female-focused urban newsletter, is an instructive case in how to stitch a deals offering with the brand fabric. Across its 12 metro properties, DailyCandy Deals has enlisted more than 3 million subscribers. GM Tricia Han credits an established brand relationship with its audience. “We have 10 years of experience in curating local businesses and experiences. People trust us.”
Interestingly, Moran pointed out that Han is a product manager rather than a sales executive. He then noted that this is true for many of the biggest publisher success stories (Travelzoo, Thrillist, The San Diego Union-Tribune).
Where deals companies have caught the most grief is in merchant care, with Groupon, LivingSocial, et al, fighting doubts about their ability to grow into customer retention channels that establish them as long-term SMB partners. LivingSocial cofounder Aaron Batalion refuted that notion. “We’re hiring people to help the merchant, to even teach them about their own business. We want to learn about their average ticket price and receipt value” so that the right deal is created.
Moran showed perhaps the most interesting slide, a visual representation of the numerous layers that are now stacking onto the original deals sites. The result is a more complicated, but potentially opportunity-rich ecosystem.
Beyond destination sites, white-label providers, publishers, vertical sites and aggregators, Moran also highlighted merchant services (Genbook, SinglePlatform, Closely), consumer services (CityPockets) and emerging bid-based offer exchanges (Adility’s OffersDB). In addition to aggregation, Yipit also runs a healthy data business. In other words: it’s a much bigger playground than just Groupon and LivingSocial, with diverse opportunities to participate.